Public authorities enjoy a broad discretion when awarding subsidies. That discretion is not unlimited, however. When designing a subsidy scheme, launching a call for projects or granting an individual subsidy, public authorities must not only comply with the EU State aid rules, but also respect fundamental principles such as transparency and equal treatment.
In its judgment No. 86/2026 of 9 July 2026, the Belgian Constitutional Court provides important guidance on these issues. On the one hand, the Court confirms that not every subsidy automatically constitutes State aid. On the other hand, it emphasises that even a nominative subsidy must be capable of being justified on objective grounds. The judgment therefore offers several important lessons for public authorities and granting bodies.
The facts: a federal subsidy granted to Casa legal
Since 2023, the non-profit organisation Casa legal has received a federal subsidy to finance a pilot project providing multidisciplinary second-line legal assistance to vulnerable individuals. The organisation combines legal assistance with psychosocial support through cooperation between different professional disciplines.
The federal legislature granted the subsidy directly through the annual Budget Act. No prior call for projects was organised, nor was any comparative selection procedure carried out.
The Orde van Vlaamse Balies (the Flemish Bar Association) challenged this arrangement. It argued that one organisation had been favoured without any transparent selection procedure and that the subsidy constituted unlawful EU State aid.
When does a subsidy constitute State aid?
A subsidy does not automatically constitute State aid. To fall within the scope of Article 107(1) TFEU, all of the following conditions must be met cumulatively: the measure must be financed through State resources and be imputable to the State, confer a selective economic advantage, have the potential to distort competition, and be capable of affecting trade between Member States.In this case, the debate focused primarily on the last of these conditions.
According to the Constitutional Court, the measure concerned a local pilot project aimed at a very specific category of vulnerable beneficiaries. Moreover, the services required highly personalised and intensive assistance. In those circumstances, the Court considered it unlikely that the subsidy would discourage organisations established in other Member States from operating in Belgium or attract beneficiaries from abroad.
As the measure was not capable of appreciably affecting trade between Member States, one of the essential conditions for State aid was absent. Consequently, the subsidy did not constitute State aid within the meaning of Article 107 TFEU and did not require prior notification to the European Commission.
The judgment therefore confirms an important principle of EU State aid law: even where a public authority subsidises only one organisation, it remains necessary to assess all State aid criteria on a case-by-case basis. A selective subsidy is not automatically prohibited State aid. That said, this should not be interpreted as meaning that local or socially oriented subsidies always fall outside the scope of EU State aid law. The assessment remains highly fact-specific. A prior State aid assessment therefore remains strongly advisable.
Subsidy procedures must also comply with the principle of transparency
Equally important are the Court’s findings regarding the organisation of subsidy procedures.
The Flemish Bar Association argued that the federal government had immediately designated a single beneficiary without launching a prior call for projects or comparing potential candidates. In its view, other organisations should likewise have been given the opportunity to submit a comparable project.
The Constitutional Court ultimately held that the relevant budgetary provision was unconstitutional insofar as it exclusively designated Casa legal as the beneficiary. According to the Court, such an exclusive designation, as a matter of principle, requires a transparent selection procedure unless it can be objectively demonstrated that only one organisation is capable of carrying out the project. Although the Court annulled the relevant provision, it maintained its legal effects in the interests of legal certainty.
This aspect of the judgment is particularly relevant in practice.
The Court emphasises that, where several organisations may potentially qualify for a subsidy, public authorities should in principle organise a transparent procedure preceded by adequate publicity. Only where it is established, or may reasonably be assumed, that a single organisation alone can achieve the intended objectives may such a procedure be dispensed with. Accordingly, while not every subsidy must necessarily be preceded by a formal call for projects, the judgment clearly demonstrates that transparency has become an increasingly important principle in subsidy law. An open selection procedure not only reduces the risk of legal challenges, but also strengthens the objectivity and credibility of public funding decisions.
What are the risks of non-compliance with subsidy and State aid rules?
Poorly designed subsidy measures may have significant legal consequences.
Where a support measure fails to comply with EU State aid rules, the European Commission may declare it incompatible with the internal market and require the Member State concerned to recover the aid, together with interest.
In addition, national courts and the Belgian Council of State may intervene where subsidies are granted without sufficient transparency, without objective justification or in breach of fundamental principles such as equal treatment.
A timely legal assessment allows these risks to be identified at an early stage and helps avoid costly litigation afterwards.
What lessons can public authorities draw from this judgment?
The judgment highlights the importance of addressing several fundamental questions at the outset of any subsidy scheme.
Does the measure genuinely constitute a subsidy, or should it instead be qualified as a public contract? Could it amount to State aid? Is prior notification to the European Commission required? Should a call for projects be organised, or can a nominative subsidy be objectively justified?
Carefully assessing these issues in advance and properly documenting the underlying reasoning will significantly reduce legal risks.
Legal advice on subsidies, State aid and public procurement
Tender Law has extensive expertise in subsidy law, EU State aid law and public procurement law. We advise federal authorities, regional governments, local authorities, intermunicipal associations, universities, healthcare institutions and businesses on the design of subsidy schemes, calls for projects, nominative subsidies, project grants and other public funding mechanisms.
Our services include State aid assessments under Article 107 TFEU, advice on compliance with EU State aid rules, the design of transparent subsidy procedures and the distinction between subsidies and public procurement.
Would you like a legal review of a subsidy scheme, a call for projects or another public funding measure? Our team would be pleased to assist you.
Would you like to learn more?
Read the full judgment of the Belgian Constitutional Court here (No. 86/2026 of 9 July 2026 – ECLI:BE:GHCC:2026:ARR.086).