The Latest On Hinkley Point A Study In State Aid To Nuclear - a podcast by Florence School of Regulation

This podcast focuses on the latest developments in Case C-594/18 P: Austria v European Commission, a long-running legal saga surrounding the development of a new nuclear power plant at Hinkley Point in the UK, which sheds light on EU state aid rules and the interaction between the Euratom Treaty and the TFEU. As the Euratom Treaty does not contain state aid rules, to what extent do the principles of the TFEU apply when it comes to determining the compatibility of state aid to the nuclear sector?

In 2014, the EC approved the UK’s plans to give state aid to support the construction of two EPR reactor units at Hinkley Point C, deeming it compatible with EU state aid guidelines, and thus the internal market. The basis of their approval was Art 107(3)(c) TFEU. The project, a joint venture between EDF and CGN, would be the first new nuclear power station in the UK in almost 20 years, and account for roughly 7% of the UK’s electricity supply. In the rare move of one MS challenging a state aid decision for another, Austria launched an appeal to this decision in 2015 on the basis that approval of the scheme contradicted the EU policy to support renewable energy. The case divided Member States. In July 2018, the GC dismissed the action on the basis that there was no need to establish an EU-wide objective of common interest for the project or, surprisingly, to establish that the aid is there to correct a market failure. Furthermore, it was found that the ET principles are separate from those of the TFEU/TEU, and thus the principles on the protection of the environment do not apply. Austria appealed the decision.

In a non-binding opinion of 7 May 2020, AG Gerard Hogan suggested EU judges should dismiss the appeal. He argued that Art 107(3)(c) TFEU does not predicate the compatibility of state aid upon it serving a ‘public’ or ‘common’ interest objective. Rather, compatibility need only be determined according to the potential of the aid to distort competition or trade. By accepting the objectives of the ET, all MS have “clearly signified their unqualified acceptance in principle of the right of other Member States to develop nuclear power plants in their own territories should they wish to do so.” He also noted that EU law (via Art 194 TFEU) has given each MS the right to determine its own energy mix. Ultimately, according to Hogan’s interpretation, compatibility cannot be used as an instrument to effect positive integration.

In the subsequent ruling of 22 Sept 2020, the Court dismissed Austria’s appeal and confirmed that the construction of the power plant may benefit from state aid, as originally approved by the EC pursuant to Art 107(3)(c) TFEU and in line with AG Hogan’s opinion. The Court confirmed that in the absence of specific state aid rules in the ET, the state aid rules of the TFEU are applicable to the nuclear energy sector. The Court concluded that the compatibility of aid is not dependent on the pursuit of a ‘common interest.’ The existence of a market failure may therefore be a factor in declaring aid compatible, but it is not a requisite for compatibility, according to the conditions laid out in Art 107(3)(c). Significantly, contrary to the GC’s findings, the new ruling held that state aid for an economic activity, which contravenes environmental rules, cannot be declared compatible with the internal market. The same is true for the provisions of secondary EU law on the environment. However, in the same ruling, the Court noted that the EC is required to take into account the negative effects of the state aid on competition and trade between MS only, and concludes that the GC in its earlier ruling was correct in the interpretation that the EC did not have to take into account the negatives effects of the measures on the environmental principles. How does this tally? What can be deducted from this split conclusion with respect to environmental protection principles?

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