August 2018

News Update EU State Aid Special
9 augustus 2018

CJEU declares request by German court on validity of Commission recovery decision inadmissible

The CJEU declared the request for a preliminary ruling by the Verwaltungsgericht Frankfurt am Main inadmissible, on 25 July 2018. The applicants in the main procedure were four German companies active in the production, smelting and processing of steel. The companies benefited from a cap on a levy (the EEG-surcharge) that was intended to limit energy costs for electricity-intensive industries. The cap was revoked by the German authorities with retroactive effect, following a Commission Decision ordering the recovery of the State aid relating to the cap. Based on the arguments put forward in the main proceedings by the companies, the German court requested a preliminary ruling from the CJEU on the validity of the Commission Decision. Despite each of the companies bringing an action before the General Court (GC) against the Commission Decision initiating the formal investigation procedure, the CJEU declared the request for a preliminary ruling inadmissible, because the companies had failed to bring an action before the GC for the annulment of the Commission Decision on the recovery of the State aid. According to the CJEU, having failed to exercise their right to bring an annulment action against the recovery decision of the Commission, the applicants in the national procedure could not rely on the invalidity of that decision in support of their actions before the national court against national recovery measures implementing that decision.

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CJEU confirms Commission on Spanish tax lease system in shipping sector 

On 25 July 2018, the CJEU set aside a judgment of the General Court (GC) that annulled a Commission Decision declaring a Spanish tax lease system to constitute incompatible State aid. The relevant tax system allowed shipping companies to acquire vessels via a specific contractual and financial structure. Under this structure, an Economic Interest Grouping (EIG) (formed by a bank and investors who purchased shares in the EIG) would take a lease out on a ship from a leasing company and in turn lease it to the shipping company under a 'bareboat charter'. The EIG benefited from tax advantages, which were partly transferred to the shipping company in the form of a rebate on the vessel price. The Commission considered that this advantage constituted State aid to the EIGs and their investors. Conversely, the GC held that it was the investors rather than the EIGs who had to be considered as the beneficiaries of the State aid because of the fiscal transparency of the EIGs (in relation to their members). However, the CJEU ruled that because the tax measures at issue were in fact applied to the EIGs (the advantages favoured the activities carried out by the EIGs), the EIGs were the direct beneficiaries of the advantages – despite being fiscally transparent. According to the CJEU, by not acknowledging that the EIGs were beneficiaries of the measures (on the grounds that those entities were fiscally transparent), the GC wrongly held that EIGs could not be the beneficiaries of the measure solely because of their legal form and the relevant rules on the taxation of profits.


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General Court recognises nuclear energy as an objective of public interest

On 12 July 2018, the General Court (GC) dismissed Austria's action for annulment of the Commission Decision approving the UK's aid scheme for the Hinkley Point nuclear power plant. In 2014, the Commission approved the scheme which it considered necessary for attaining the public interest objective of creating new nuclear energy generating capacity. Austria argued that the promotion of nuclear electricity cannot be an objective of common interest when it does not take into account the legitimate interests of a single Member State and when some Member States have always rejected the notion that the construction of new nuclear reactors is a European objective of common interest. Moreover, Austria argued that the technology used at Hinkley Point is not new and that the intervention of the UK is not necessary. The GC however ruled that the creation of new nuclear energy production capacities relates to the goal of the Euratom Community to facilitate investment in the nuclear field, and that the provisions of the EU Treaty and of the TFEU Treaty are not to derogate from the provisions of the Euratom Treaty. The GC further held that state intervention was necessary to create new nuclear energy generating capacity, taking into consideration the substantial risks relating to investments in nuclear energy. Finally, the GC underlined that the UK has the right to determine its own energy mix and to use nuclear energy as a source in that mix.

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Dutch compensation scheme for damage caused by earthquakes does not constitute State aid

The Commission decided on 13 July 2018 that the Dutch compensation scheme for damage caused by earthquakes induced by gas extraction does not constitute State aid. The compensation will be financed by a non-profit foundation that will manage real estate activities concerning the repair and sale of buildings that suffered damage caused by drilling for gas. Both the state and Nederlandse Aardolie Maatschappij (NAM), the company involved in gas extraction, will contribute financially to the foundation. NAM will finance 75% of the activities of the foundation and the Dutch state will finance the remaining 25% of the costs through a grant of €10 million. According to the Commission, the scheme will ensure the continuity of real estate transactions and does not confer an advantage on NAM. Moreover, the Commission welcomed the application of the 'polluter-pays' principle, as the repair activities are ultimately funded by NAM. 


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Best practices Code State aid


On 16 July 2018, the Commission adopted a new Best Practices Code for State aid control as part of the State Aid Modernisation agenda. This Code provides guidance to Member States, aid beneficiaries and other stakeholders on how State aid procedures work in practice and how these actors should work together in such procedures. In particular, it includes guidance on how Member States can implement measures that are unlikely to distort competition without formally notifying the Commission. The Code describes the steps that the Commission is taking to increase the transparency, predictability and speed of State aid procedures. The Code invites Member States to contact the Commission before formally notifying potential State aid measures ('pre-notification contacts'). Further, the Code provides that transparency and predictability of the likely duration of a State aid investigation can be enhanced by Mutually Agreed Planning, which enables the Commission and the Member State to agree on: (i) the priority treatment of the case; (ii) the information that should be provided and; (iii) the form and duration of the assessment by the Commission after notification. 


See best practices code


Written by:
Greetje van Heezik

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