Court upholds EC decision on state aid to UK's Hinkley nuclear plant

(LUXEMBOURG) - The EU's top Court upheld Thursday a Commission decision to approve aid provided by the UK in favour of the Hinkley Point C nuclear power station, dismissing an action brought by Austria.

The Commission had in 2014 approved aid which the UK was planning to implement in favour of unit C of the nuclear power station at Hinkley Point (On the UK's Somerset coast) for the purpose of creating new capacity for the generation of nuclear energy. This unit is scheduled to enter into service in 2023 and its operational life is calculated to be 60 years.

That aid, made up of three parts, is envisaged for the future operator of unit C, the company NNB Generation (a subsidiary of EDF Energy).

First, a 'contract for difference' seeks to ensure price stability for sales of electricity and to guarantee compensation in the event of an early shutdown of the nuclear power station. Second, an agreement between the investors of NNB Generation and the UK's Secretary of State for Energy and Climate Change guarantees compensation in the event of an early shutdown on political grounds. Third, a credit guarantee by the UK on bonds to be issued by NNB Generation is intended to ensure the timely payment of principal and interest of qualifying debt, up to a maximum level of 17 billion pounds sterling (GBP).

The Commission concluded had concluded that the aid in question was compatible with the internal market. It maintained that aid was necessary to eventually attain the objective of creating new nuclear energy generating capacity, with the understanding that the risk of distortion of competition was limited and that any negative effects of the aid were offset by its positive effects.

Austria sought annulment of the decision before the General Court, being supported by Luxembourg, while the Czech Republic, France, Hungary, Poland, Romania, Slovakia and the UK intervened in support of the Commission.

By today's judgment, the General Court has dismissed the action brought by Austria.

First, EU rules on state aid were applicable to measures relating to the area of nuclear energy, such as those at issue.

Next, with regard to Austria's argument that the promotion of nuclear electricity does not constitute an objective of 'common' interest capable of justifying aid for the development of a certain activity, the General Court states that the objective pursued by a Member State must be one of public interest and not solely an objective in the private interest of the beneficiary of the aid. By contrast, it need not necessarily be an interest of all the Member States or of a majority of them. Consequently, the Commission did not err in taking the view that the UK was entitled to define the development of nuclear energy as being a public-interest objective, even though that objective is not shared by all of the Member States.

The General Court notes in this regard that the objective of promoting nuclear power, and, more specifically, of promoting the creation of new nuclear energy production capacities, is related to the Euratom Community's goal of facilitating investment in the nuclear field. Furthermore, it follows from the FEU Treaty that each Member State has the right to choose between the different energy sources those which it prefers.

With regard to Austria's argument that the technology used at Hinkley Point C is not new, the General Court finds that neither the rules on State aid nor the Euratom Treaty require that the existence of technological innovation be established. In any event, it is common ground that the technology to be used in Hinkley Point C is more advanced than that used in the nuclear power stations which it is supposed to replace.

The General Court also rejects Austria's arguments to the effect that the intervention of the UK is not necessary. According to the General Court, the Commission acted correctly in law in concluding that, given the lack of market-based financial instruments and other types of contracts that could hedge against the substantial risks5 to which investments in nuclear energy are subject, State intervention was necessary in order to create, in good time, new nuclear energy generating capacity.

So far as the proportionality of the aid in question is concerned, the General Court finds, inter alia, that Austria has failed to invalidate the Commission's findings that it was unrealistic to expect that a comparable amount of wind energy generation capacity could be constructed within the same time frame as that envisaged for the construction of Hinkley Point C, given the intermittent nature of that source of renewable energy.

Moreover, Austria has been unable to show that the weighing up, by the Commission, of the positive and negative effects of the measures at issue is vitiated by a manifest error. The General Court points out in this regard that the UK has the right to determine its own energy mix and to maintain nuclear energy as a source in that mix, and that the project to build Hinkley Point C is intended solely to prevent a drastic fall in the contribution of nuclear energy to overall electricity needs.

With regard to the characterisation of the measures at issue, the General Court notes that these are intended to allow NNB Generation to commit to investing in the construction of Hinkley Point C, and it states in this regard that there is nothing to preclude an aid measure which pursues a public interest objective, which is appropriate to and necessary for the attainment of that objective and which does not adversely affect trading conditions to an extent contrary to the common interest, from being declared compatible with the internal market, irrespective of whether it must be characterised as investment aid or as operating aid.

Finally, the General Court rejected Austria's argument that the UK ought to have launched a tendering procedure for the Hinkley Point C project. The measures in question do not constitute a public contract or a concession, but a mere subsidy, since they do not allow the UK to require NNB Generation either to build Hinkley Point C or to supply electricity, said the Court.

Judgment in Case T-356/15 - Austria v Commission