Separating state aid : a conceptual study to evaluate the use of accounting separation as a tool for preventing cross-subsidization in the current legal framework for state aid
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- Master Thesis 
Issues arising from public authorities competing in markets have been somewhat overlooked, despite the OECD’s emphasis on the need for equal terms in the competition between public and private undertakings (Honoré, 2017). If a single entity is engaged in both economic and non-economic activities, public resources flow within the organization, making it difficult to ascertain which resources are used for which purposes. To prevent undertakings from using public resources to subsidize competitive activities, the EU has imposed requirements to keep separate accounts between economic and non-economic activities. The Commission considers this to be “the most efficient means by which fair and effective application of the rules of competition […] can be assured.” 1 The requirement to keep separate accounts is meant to prevent States from circumventing State aid rules using legislative techniques, for example by organizing the public undertaking as part of a municipal body (Honoré, 2017). This thesis studies the requirements set out in the regulation on how a separation of accounts is implemented. Further, a selection of cases is reviewed to see how the requirements are applied by the ESA as a supervisory body. The thesis finds that the requirements are very broad and unspecific, and inconsistent application by the ESA results in uncertainty as to acceptable methods of allocating cost. The legal framework could be improved by imposing more specific requirements such as those proposed by Hjelmeng et al. (2018, p. 236).