The default position under the EEA Agreement is that state aid is incompatible with the functioning of the internal market and therefore not allowed (Article 61(1)). There are, however, certain exceptions, which mean that state aid can be allowed in some circumstances (Articles 61(2) and (3)).
The EEA Agreement incorporates the relevant secondary legislation of the European Council of Ministers and European Commission on the definition of aid and compatibility of aid with the functioning of the internal market (Article 63 and Annex XV).
All state aid must be kept under review; this is done by the Authority in the case of EFTA States party to the EEA Agreement and by the Commission in the case of EU Member States (Article 63).
State assistance in existence since before the entry into force of the EEA Agreement is protected from being automatically treated as illegal state aid, but must be kept under review.
There are procedural rules for the approval of state aid by the Authority, including a “stand still” provision which requires aid to be approved before it is implemented (Protocol 3 of the Surveillance and Court Agreement on the functions and powers of the Authority).
State aid guidelines, explain how the Authority interprets and applies the state aid rules, in particular its assessment of the compatibility of aid.