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Navigating the Complexities of State Aid: An Interview with Andreas von Bonin

By Giulia Galletti and Evangelia Kostopoulou

In this interview, Andreas von Bonin, Antitrust Partner and Head of Antitrust, Competition & Trade at Freshfields Brussels, shares his perspective on the nuances of State aid law, the practicalities of managing regulatory requirements for financial institutions, COVID-19 and emergency aid, and the shifting landscape of energy transition regulation.

Question One: For students who are new to State aid, could you walk us through what a typical case looks like from start to finish, starting from the first client call, to how you structure the legal assessment, and finally, how you engage with the Commission or national authorities?

Answer: State aid matters typically fall into two broad categories, each with a distinct workflow.

"No aid" cases: here, the central question is whether the measure constitutes State aid at all — typical in privatisations, capital injections, Market Economy Investor Principle (MEIP) assessments, and public concessions. These cases are won or lost on evidence: can you demonstrate, credibly and contemporaneously, that the State acted as a private market operator would have?

This shapes the work from the outset. Clients routinely underestimate how much economic material is needed. Claiming a deal is "market-conform" is never sufficient. The file must rest on robust valuation reports, defensible pricing methodologies, transaction comparables, and a business plan showing an acceptable expected return — all documented at the time of the decision.

Concession cases illustrate the point: the operator must show that the price paid leaves it with only an appropriate return, while residual value accrues to the State. In capital increases by public shareholders, projected profitability and risk assumptions must be substantiated with credible modelling and contemporaneous documentation.

Compatibility cases: where it is accepted that the measure is State aid, the focus shifts to whether the aid is justified, proportionate, and protected against overcompensation. This is the typical pattern for energy and climate measures, large industrial projects, and crisis-related support.

The Commission increasingly expects a funding gap analysis, often coupled with a clawback mechanism. The funding gap is assessed by comparing the project's net present value with and without aid: if the project is unviable absent aid (negative NPV), the measure should not exceed the amount needed to bridge that gap. This requires detailed financial modelling and carefully justified assumptions.

Engagement with authorities is structured and iterative — pre-notification discussions, rounds of questions on economic modelling, and negotiation of safeguards. The more complex the file, the more it becomes a joint legal-economic exercise.

Question two: When a client brings a government measure to you, what are the first steps you take to decide whether it is actually "State aid" under EU law, and what are the most common situations where companies underestimate the risk?

Answer: The first step is to classify the case: are you building a "no aid" case, or are you accepting the existence of aid and focusing on compatibility? This initial classification shapes the entire strategy.

In market-economy-operator cases — privatisations, capital injections, shareholder loans, concessions — the decisive question is whether the State acted as a rational private operator would have. Clients consistently underestimate the evidentiary burden. The analysis must be anchored in contemporaneous, objective evidence: valuation reports, pricing methodologies, IRR calculations, and documentation showing that expected returns match what a private investor would have required given the risk profile.

Contemporaneity is key. The Commission and the courts examine what was known and documented when the decision was taken, not ex post rationalisations.

In compatibility cases, the underestimation typically concerns proportionality. Once aid is accepted, the Commission scrutinises whether it is limited to the minimum necessary. Under modern frameworks such as the CEEAG, this requires a structured funding gap analysis and often a clawback mechanism. If revenues exceed or costs fall below projections over the project's lifetime, the beneficiary must repay the surplus — a possibility that must be factored into initial business modelling.

Finally, litigation risk is increasingly underestimated. Particularly in the energy and green transition space, competitors are more willing to challenge Commission approval decisions before the EU courts, meaning the analysis must withstand judicial scrutiny, not only administrative review.

Question three: In your experience, what is the most common misconception clients have at the beginning of a State aid matter, and how do you "translate" their business story into reasoning the Commission finds credible?

Answer: The most frequent misconception is that a strong policy or business narrative is sufficient. Clients often present a compelling story — the project is strategic, innovative, aligned with the green transition, or socially desirable. That may all be true, but the Commission requires structured legal and economic analysis, not political attractiveness.

The core questions are always: What would happen absent the measure? Is the aid necessary? Is it proportionate? Does it avoid overcompensation?

The lawyer's role is to transform business ambition into legal-economic logic. Rather than arguing that "the project needs support," the analysis must demonstrate that, absent aid, the project would not proceed or would proceed in a materially less desirable form — through modelling the counterfactual, identifying the funding gap, and showing the measure is limited to the minimum required.

In market-economy-investor cases, the narrative must be reconstructed as if the State were a rational private investor. The focus is on expected returns, risk-adjusted profitability, and information available at the time. Credibility depends not on how convincing the story sounds today, but on whether contemporaneous documents and financial models support the investment rationale.

Question four: During COVID, governments adopted support measures very quickly. What were the key questions the Commission asked before approving a measure, and what kind of evidence made the difference?

Answer: COVID-related State aid measures fell into two structural categories, each with a distinct analytical framework.

Aid schemes were the dominant instrument. Under the Temporary Framework, Member States notified general programmes addressing defined categories of beneficiaries — liquidity shortages, working capital constraints, solvency risks. The Commission's assessment focused on scheme architecture rather than individual beneficiaries: compliance with maximum aid ceilings, minimum interest rates, guarantee premia floors, duration limits, and transparency obligations. If the structure complied, implementation shifted largely to national authorities.

However, Member States often tested the boundaries — for example, layering subsidised loans with grants covering interest payments to reduce financing costs close to zero. The Commission examined whether cumulative effects respected proportionality and anti-overcompensation safeguards, ensuring emergency flexibility did not produce structural distortions.

Individual ad hoc measures were more complex, typically involving large strategic undertakings — airlines, tourism operators, systemically relevant companies — whose needs could not be met through standardised schemes. The Commission's assessment revolved around:

• Necessity: a genuine, demonstrable liquidity shock attributable to COVID;
• Appropriateness: whether the chosen instrument (loan, guarantee, recapitalisation, hybrid capital) suited the specific problem;
• Proportionality: whether the amount was limited to what was strictly required to restore viability, supported by detailed liquidity forecasts and stress scenarios.

Particular scrutiny applied to overcompensation risks. In recapitalisation cases, remuneration structures, step-up clauses, dividend bans, acquisition bans, and exit incentives were built into the instruments. Another critical issue was whether the beneficiary was already an "undertaking in difficulty" before the pandemic — the Temporary Framework targeted exogenous shocks, not structurally failing companies, making the financial position as of 31 December 2019 a decisive element.

Question five: How does a "State aid legacy" practically affect a deal, especially in terms of transaction timing, protections, and regulatory strategy?

Answer: A State aid decision often does not end with approval. It may contain structural or behavioural commitments — including divestment obligations — with immediate transactional consequences. A seller operating under a legal obligation to divest is not acting from full commercial discretion, which inevitably affects bargaining power, timing, and negotiation dynamics.

The CVC / Ethniki transaction illustrates this well. The National Bank of Greece (NBG) was required, under earlier State aid commitments, to divest its insurance arm. Once a buyer was identified, the transaction triggered merger control review because the acquirer held related assets. This creates inherent regulatory tension: State aid compels the divestment, while merger control independently assesses whether the acquisition is compatible with competition. In theory, merger control could block or condition the deal in a way that frustrates the State aid commitment. Managing this interplay requires careful regulatory dialogue and an argument of systemic coherence — though the two regimes remain legally distinct.

Another recurring dimension concerns acquisition bans. Under financial crisis and COVID recapitalisation measures, beneficiaries were often prohibited from pursuing acquisitions while aid remained outstanding, directly affecting M&A strategy and group-level planning. This must be factored into due diligence, shareholder agreements, and conditionality structures.

More broadly, State aid legacy shapes the entire transactional framework: divestment deadlines may compress negotiations; approval under multiple regimes may be required; and conditions precedent must address merger clearance, commitment compliance, and potentially State aid approval for ancillary arrangements. Successful deal execution requires aligning all of these within a coherent regulatory strategy.

Question six: What makes State aid advice in the banking sector uniquely complex compared to other industries?

Answer: The financial sector presents structural features that make State aid analysis distinctly more complex.

Systemic interdependence: banks are not merely competitors — they are counterparties, lenders, borrowers, and liquidity providers to one another through interbank lending, derivatives exposure, and wholesale funding. The failure of one institution can trigger contagion across the system. Intervention is therefore often justified not only by the individual institution's viability but by broader financial stability concerns — a systemic risk logic with no equivalent in ordinary product markets.

Valuation complexity: bank balance sheets consist largely of financial instruments — loans, securities, derivatives — whose value can fluctuate dramatically. In crises, market prices may collapse due to panic or illiquidity, even where underlying assets retain higher "real economic value" on a longer-term basis.

This distinction between nominal value, market value, and real economic value is central. Consider a non-performing loan with a nominal value of 10, a real economic value of 8, and a crisis market price of 5. If the State intervenes, support must bridge only the gap between distressed market value and real economic value (5 to 8), not the full nominal value. Anything beyond real economic value risks overcompensation.

This valuation exercise requires granular asset analysis, forward-looking cash-flow modelling, and independent expert involvement — all embedded within a broader prudential framework of supervisory assessments, stress tests, capital adequacy requirements, and resolution planning.

The combination of systemic interdependence, volatile asset valuation, prudential regulation, and crisis dynamics makes banking State aid cases uniquely intricate, demanding not only legal expertise but deep understanding of financial modelling, regulatory capital, and macroeconomic context.

Question seven: What should students watch if they want to understand the next wave of State aid enforcement in energy and climate?

Answer: Three structural axes are likely to shape the next phase: infrastructure, generation, and resilience.

Infrastructure: Electricity grids, hydrogen pipelines, LNG terminals, interconnectors, and storage facilities are indispensable for the energy transition, yet financing remains largely national, reflecting different regulatory traditions and cost-allocation models. Energy systems, however, must function at European scale. The resulting tension — how to reconcile nationally designed funding mechanisms with cross-border integration — raises questions about risk allocation, regulated returns, and the justification of State support for assets with both national and European public-good characteristics.

Generation: Contracts for Difference (CfDs) have become a central support instrument. Under a CfD, a generator agrees on a strike price; if the market price falls below, the public authority pays the difference; if it exceeds, the generator returns the surplus. CfDs are typically allocated through competitive tenders, with the lowest strike price prevailing. However, reliance on lowest-price bidding may incentivise aggressive pricing assumptions, potentially affecting long-term quality, technological resilience, or supply-chain robustness — qualitative considerations the State aid framework must increasingly engage with.

Resilience: The EU's objectives now extend beyond decarbonisation to strategic autonomy and reduced dependence on third-country technologies. Instruments such as the Net-Zero Industry Act and the Foreign Subsidies Regulation signal a shift from a purely liberal market paradigm toward one incorporating geopolitical risk, supply-chain security, and industrial sovereignty. Measures designed to foster domestic production of key technologies may pursue objectives beyond traditional market failure correction, intensifying the interaction between competition law, industrial policy, trade defence, and procurement rules.

For future practitioners, the central challenge lies at this intersection: understanding how competition principles operate alongside industrial strategy and strategic autonomy considerations will be essential for navigating the next generation of energy and climate-related cases.

About the Authors

Andreas VON BONIN

Andreas von Bonin's practice focuses on European competition law, spanning merger control and joint venture cases, antitrust compliance and investigations of anti-competitive behaviour, as well as competition litigation before the EU courts. Dr. von Bonin also specialises in EU state aid and regulatory procedures, including in the context of privatisations, state aid breaches through member states’ tax measures, and government stabilisation and restructuring measures.

With over 20 years of experience working with the European Commission and other EU institutions, he has a very solid understanding of EU priorities and processes. He also oversees our EU regulatory and public affairs practice, which advises clients at the interface of law, politics, and business.

Andreas von Bonin leads Freshfields Brussels' antitrust practice.

Giulia GALLETTI

Giulia Galletti is an LL.M. candidate in European Legal Studies at the College of Europe. She holds a Master's degree in Law from the University of Bologna and an LL.M. from King’s College London, and has been admitted to the Italian Bar. 

She previously trained at an international law firm and completed a Blue Book traineeship at the European Commission (DG COMP). Her research interests include Competition Law and Economics, Financial Services, and International Trade. 

She currently serves as President of the Competition Society at the College of Europe.

Evangelia KOSTOPOULOU

Evangelia Kostopoulou is an LL.M. candidate in European Legal Studies at the College of Europe. She holds a master's degree in law and technology from Tilburg University and is admitted to the Greek Bar. She previously trained at EY Law, one of the largest national law firms in Greece. 

Her academic interests lie in EU Competition Law, and she is particularly interested in questions of consumer protection, sustainability transitions and digital platform governance. Alongside these substantive concerns, she has a strong interest in competition procedure and the procedural safeguards that structure EU antitrust enforcement. 

She currently serves as a Board Member of the Competition Society at the College of Europe.