The Role of the Governments and Governmental State Aid on Hard-Defence Material Sector in the EU

Abstract: This thesis concerns the role of the governments and the role of the governmental state aid in the hard-defence sector in Europe. The hard-defence industry and the factors affecting competition in the industry are studied. It is found out that the governments have a strong role in the hard-defence sector in the European Union. One of the ways that the governments affect the operations in the industry is state aid. State aid is possible due to the existence of Article 296 EC, which exempts measures concerning trade and production of products intended for military use, and which are seen necessary to protect the safety of the state. The application of Article 296 EC in case of state aid as well as the role of state aid in the hard-defence material sector are studied as well in this thesis. The state aid is seen sometimes to restrict trade and competition but for some fields it is seen necessary. Suggestions of the Commission of the European Union concerning the scope of Article 296 EC is studied at the end of this thesis. The Commission would be willing to narrow down the scope of this Article and have the hard-defence sector more under the regime of EC legislation.