November 30
2020
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8th May 2020
Competition & State Aid

Analysis: “Advocate General Hogan argues that the Commission may approve State aid for the development of nuclear energy” by Fernando Pastor-Merchante

This case has its origin in the action of annulment brought by Austria and Luxembourg against Commission Decision 2015/658, which cleared the UK plan to grant State aid for the construction of a new nuclear plant (Hinkley Point C). The General Court dismissed the action in a long and complex judgment, in which it held that Member States may invoke the promotion of nuclear energy as a legitimate objective for the purposes of Article 107(3)(c) TFEU and that, in light of that objective, the measures notified by the UK were appropriate, necessary and proportionate. The reader is referred to Phedon Nicolaides’ annotation in EStAL for a thorough review of the judgment.

In yesterday’s Opinion, Advocate General Hogan proposed that the Court of Justice should reject the appeal brought by Austria against that judgment. However, the Advocate General takes issue with an important aspect of the General Court’s reasoning in this and in previous cases: the very idea that in order to be compatible, State aid must further an objective of ‘common interest’. His point is that Article 107(3)(c) TFEU does not condition the compatibility of State aid upon its serving a ‘public’ or ‘common’ interest objective. In his view, this provision lays down a positive and a negative condition. The positive condition is that State aid should ‘facilitate the development of certain economic activities’ (which is why operating aid may not be authorised under this provision, although another interesting aspect of the Opinion is that it discusses the unclear distinction between investment and operating aid). The negative condition is that State aid should not ‘adversely affect trading conditions to an extent contrary to the common interest’ (which does not constrain the policy objectives behind State aid, but only their spillover effects upon other Member States).

Should the Court follow the Advocate General’s Opinion, the case would become a crucial reference in the interpretation of Article 107(3)(c), which is the provision on the basis of which the Commission adopts most of its decisions on State aid. The main take-away from the case would be the confirmation that the rules on State aid follow the logic of negative integration: they do not limit the objectives that Member States may pursue through their measures of financial assistance to firms, but only the externalities that they have upon competition and trade within the internal market. While this may seem obvious in light of the wording of the Treaty, it is nevertheless an important clarification, because the Commission has used this provision in the past to define what is ‘good’ and ‘bad’ State aid and to carry out its own industrial policy (as documented by Michael Blauberger). In this sense, a victory in this case could backfire against the Commission in the future, should this doctrine be used to challenge negative decisions made on the basis of the objectives served by the measures under scrutiny.

Needless to say, the Opinion is also important from an energy policy perspective, because it endorses the possibility to grant State aid for the development of nuclear power stations. Indeed, Advocate General Hogan makes it clear that the outcome of the case would be the same even if the Court was not ready to depart from the idea that State aid must serve a ‘common interest’ objective, because the development of nuclear power plants is a core objective of the Euratom Treaty and hence of the Union’s body of primary law.

 

Fernando Pastor-Merchante is Assistant Professor of Law at IE University. His research interests lie in the field of EU administrative law, with a special focus on State aid governance. He is the author of ‘The Role of Competitors in the Enforcement of State Aid Law’ (Oxford: Hart, 2017).

 

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