The Dynamic of Institutions Establishment: State Aids, the European Commission, and the European Court of Justice

Amanda M. Alves (University Paris-Dauphine, PSL)
Eric Brousseau (University Paris-Dauphine, PSL)
Timothy Yu-Cheong Yeung (University Paris-Dauphine, PSL)

Abstract: This work takes a dynamic perspective on institution building and studies the interactions between the European Commission and the European Court of Justice in the construction of the European Union. We focus on how these two bodies attempt to strengthen their legitimacy by making decisions. The Commission is mandated to deepen the EU integration, while the Court is aimed at establishing the rule of law. To do so we focus on the decision of both bodies related to state aids; i.e. subsidies granted by national governments in favor economics players involved in the provision of services related infrastructures. Relying on an original database covering all state aids programs (6,000) between 2000 and 2015, we show that the Commission tends to reject programs originating from countries who are resistant to the EU integration. On the other hand, we show that when firms or national governments appeal the decision made by the Commission, the reversal of the Commission decision by the European Court of Justice is positively correlated with the transposition deficit. Since the Commission acts before the Court, we interpret these two results as evidences showing that the Commission is actually biased against countries with greater resistance to European integration, while the Court corrects the bias created by the Commission. Overall our analysis suggests that both institutions make their decision according to their different mandates.

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