Introduction
Some cases seem to run forever. In 1960, Dimosia Epicheirisi Ilektrismou [DEI], the then sole supplier of electricity in Greece, entered into an agreement with Alouminion, an aluminium smelter, to provide electricity at preferential rates. The agreement expired in 2006. However, DEI and Alouminion, and its successor Mytilinaios and now Metlen, were not able to agree on a new tariff. DEI wanted a high tariff while Alouminion/Mytilinaios/Metlen wanted a special, lower tariff that was justified, in its view, by the fact that it was the largest consumer of electricity in the country.
About 15 years ago, DEI asked the Commission to declare that the preferential rate at which DEI was ordered by a national court to provide electricity to Alouminion/Mytilinaios/Metlen constituted state aid since DEI was still majority owned by the state. DEI’s complaint eventually led to several cases before both EU courts.
Subsequently, DEI and Alouminion/Mytilinaios/Metlen agreed to submit their dispute to the arbitration service of the Greek energy regulator [RAE]. However, DEI was unhappy with the arbitral decision and also asked the Commission to declare that that decision constituted state. That too had to be adjudicated before EU courts. The judgment reviewed in this article is the latest instalment in this long saga after the Court of Justice, in case C-701/21 P, Mytilinaios v DEI & Commission, annulled a previous judgment of the General Court and sent the case back to the General Court. The judgment of the Court of Justice was reviewed here on 5 March 2024. It can be accessed at: https://www.lexxion.eu/en/stateaidpost/state-aid-and-arbitration-of-disputes/
This article focusses on the main aspect of the judgment of the General Court of 12 November 2025 [joined cases T‑639/14 RENV II, T‑352/15 RENV and T‑740/17 RENV, Dimosia Epicheirisi Ilektrismou v Commission][1] concerning the conditions under which an arbitration decision does not constitute state aid. This is an important issue because if such a decision forces the party of the dispute that is a public authority or a state-controlled entity to make a payment to the other party that is an undertaking, the payment funded by state resources may confer a selective advantage in the meaning of Article 107(1) TFEU. The short answer is that arbitration must be an option that could be chosen voluntarily by a private market operator. By contract, one of the parties involved in disputes adjudicated by courts of law is not normally participating voluntarily. The General Court began its analysis by summarising the main features of the behaviour of a private market operator. I outline below the reasoning of the General Court on how the concept of market operator may be used to determine the presence of advantage, in general, before examining its application to disputes decided by arbitration tribunals.
Market operator principle
The concept of state aid cannot cover an advantage that can be obtained by an undertaking in circumstances which correspond to normal market conditions. [paragraph 46 of the judgment]
In order to assess whether the same measure would have been adopted in normal market conditions by a private operator in a situation as close as possible to that of the state, only the benefits and obligations linked to the situation of the state as shareholder – to the exclusion of those linked to its situation as a public authority – are to be taken into account. [para 47]
Where a Member State confers, in its capacity as shareholder, an economic advantage on an undertaking, the applicability of the market economy operator principle does not depend on the means used to place that undertaking at an advantage, nor on the nature of the means used, which may fall within the state’s public powers. It is the economic nature of the state intervention at issue and not the means used for that purpose that renders that principle applicable. [para 48]
The benefits may include not only positive benefits such as subsidies, loans or direct investment, but also interventions which mitigate the charges which are normally included in the budget of an undertaking. The supply of goods or services on preferential terms is one of the advantages which have the same effects as subsidies. [para 49]
Payment facilities constitute state aid where the recipient undertaking would manifestly not have obtained comparable facilities from a private creditor in a situation as close as possible to that of the public creditor seeking to recover sums due to it by a debtor. [para 50]
The market economy operator principle may also refer to the private creditor test, the private debtor test, or the private vendor test, which is applicable in the case of measures relating to the supply of goods and services and the fixing of conditions of sale. [para 52]
The application of the market economy operator principle requires the Commission to carry out an overall assessment that takes into consideration all the relevant evidence, all the options that such an operator would reasonably have envisaged, and the developments that were foreseeable at the time. [para 54]
The General Court also recalled that a distinction must be drawn between the applicability of the market operator test and the correct application of that test.
The applicability of the market operator test
In response to the argument of DEI that its tariff policy could not be assessed on the basis of the market operator test, the General held that “(67) in fixing bilaterally tariffs charged to its high-voltage customers, [DEI] can, as an undertaking the majority of whose capital is owned by the Greek State, potentially grant an economic advantage to certain undertakings for the purposes of Article 107(1) TFEU liable to impair competition.”
“(69) The Court notes, in relation to the applicant’s argument to the effect that its position on the market is unique by reason of the public service obligations that have enabled it to enjoy exclusive rights on the electricity market, that such a fact is not capable of precluding the applicability of the private investor test. The market economy operator principle allows for an examination of whether a hypothetical, and not actual, investor would provide the same service on terms similar to those of the State”.
“(70) In the present case, the Commission compared the applicant’s behaviour with that of a hypothetical private undertaking having the same characteristics as the applicant and being in the same circumstances. … Consequently, the fact that there is no other private undertaking comparable to the public undertaking does not suffice to preclude the application of the private investor test in the present case.”
“(71) It follows that the fact that no private undertaking in Greece could have provided electricity on the same terms as the applicant does not call into question the applicability of the private investor test in the present case. “
“(72) The applicant’s argument to the effect that it did not have any tariff policy which encompassed a policy for resolving economic disputes with Metlen must also be rejected. The private investor test applies specifically to the facts of each set of legal proceedings, independently of the initial will of the parties. It is not refuted that the dispute giving rise to the litigation concerned the parties’ contractual relationship and, in particular, the fixing of the tariff Metlen was to pay the applicant following the liberalisation of the electricity market in Greece.”
“(75) As regards the applicant’s argument to the effect that the private investor test cannot be applied to its consent to settlement of the dispute with Metlen through arbitration, the Court notes that the Commission examined that fact in relation to the various options available to the applicant for resolving that dispute with Metlen that had been ongoing for a number of years.”
“(77) In the present case, in referring the dispute for arbitration with the RAE, the applicant sought a certain level of profitability”.
“(78) First, the applicant explains that it consented to referring the dispute for arbitration instead of, for example, continuing negotiations or initiating legal proceedings before a court of law, since the arbitration award would be given within six months and since the negotiations with Metlen seemed to be at an impasse and its mounting debts were a cause for concern.”
“(79) Secondly, …, contrary to the applicant’s assertions, the comparison of its behaviour with that of a hypothetical private operator motivated by profitability considerations cannot be made in relation to the tariff fixed in the arbitration award. … it was the choice to use arbitration that is the behaviour capable of conferring an advantage on Metlen and that had to be examined by the Commission.”
“(80) The fact that the applicant could not have foreseen the price that would be fixed in the arbitration award does not negate the applicability of the private investor test.”
“(82) The applicant and Metlen freely agreed to refer their dispute to the permanent arbitration body of the RAE. … the applicant had not claimed that the conclusion of the arbitration agreement with Metlen had been imposed on it, against its will, by the Greek State in order to grant Metlen State aid. … the applicant and Metlen had voluntarily referred the dispute to the arbitration tribunal of the RAE through their arbitration agreement”.
The application of the market operator test to the facts of the present case
The General Court noted “(102) at the outset that, …, the measure that the Commission ought to have examined in order to determine whether there was an economic advantage was the applicant’s decision to refer the settlement of its dispute with Metlen to arbitration. In that regard, it must be emphasised that the market economy operator principle does not concern the outcome of the measure for the entity in question, but rather the actions undertaken. Thus, there is no need to examine whether that decision conferred an economic advantage on Metlen, but rather whether the Commission ought to have had doubts about the compatibility of that decision with State aid law.”
Then, the General Court went on to examine whether the decision to submit the dispute to arbitration conferred an advantage on Metlen, as alleged by DEI.
The General Court, first, summarised the findings of the Commission according to which DEI’s prices for Metlen had been determined by the arbitration decision. The decision was the result of an agreement to consent to arbitration that had been concluded freely by the two parties. The task of the Commission was to determine whether a prudent market operator, in a position similar to the DEI, would have concluded a similar agreement establishing the parameters to be taken into account by the arbitration tribunal. The Commission considered that the arbitration proceedings were preceded by a lengthy dispute between DEI and Metlen regarding the applicable tariff for the electricity supplied to Metlen. In addition, RAE, the Greek energy regulator, in order to protect competition in the market for electricity, required tariffs to be determined by reference to the underlying cost of the supplier’s services and defined parameters for price differentiation depending on the amount of electricity consumed by industrial users. In this respect, Metlen was unique as it was the largest user of electricity in Greece and was completely dependent on DEI, which made negotiations about pricing terms more challenging. The Commission also found that DEI attempted to set the tariff as high as possible and claimed the outstanding payments from Metlen. Despite those efforts, however, Metlen refused to sign a supply agreement and refused to pay the price demanded by DEI and also pay past bills. Consequently, Metlen’s debt was accruing and totalled around EUR 30 million in October 2011. In this situation, DEI agreed to refer the dispute to arbitration, on the condition that Metlen would make an immediate payment of part of its outstanding debt and start paying its monthly bills. The Commission concluded that by referring the dispute to arbitration, the DEI could recover part of the debt, ensure that Metlen would pay its future bills and resolve the dispute within a reasonable time and thus avoid protracted and costly court proceedings. Furthermore, the Commission considered that, since the arbitration decision determining the electricity tariff had adhered to the objective parameters agreed previously by the two parties, no economic advantage had been conferred on Metlen.
The General Court concurred with the analysis of the Commission. “(177) In the application of the private investor test, the Commission took account of aspects of the ‘context’ which showed that arbitration was a reasonable solution for the applicant, in view of the particularities of its dispute with Metlen, for which a hypothetical private operator in a situation that is as alike as possible and acting under normal market conditions could have opted.”
“(178) The applicant explained that it had opted to refer the dispute to arbitration since, first, it was faster than proceedings before the ordinary courts of law; second, Metlen had accumulated a substantial amount of debt in a particularly difficult economic and social context; and, third, several attempts by the parties to the arbitration agreement had clearly been unsuccessful, with the result that it did not really have other options available to it for resolving the dispute, apart from bringing proceedings before the ordinary courts of law.”
“(180) Clearly, a private operator would have sought to obtain payment of amounts due to it by its debtor as quickly as possible. That finding is, moreover, supported by the case-law, according to which, in its assessment of the private creditor test in relation to a debtor, the choice of dispute resolution method may take into account the duration of the procedure chosen for that resolution”. “(181) It follows that the conclusion of the arbitration agreement, in the circumstances described above, meets the ‘profitability’ test that a hypothetical prudent private investor would have sought in the applicant’s situation acting in normal market conditions.”
However, DEI counter-argued that the price fixed by the arbitration tribunal was too low.
The General Court rejected that argument. “(183) The examination of the private investor test does not mean that the price of 36.6 EUR/MWh fixed in the arbitration award was foreseeable in view of the terms laid down in the arbitration agreement, or that a prudent private operator would not have been unhappy with the outcome of the settlement of its dispute with its co-contracting party. In reality, if the tariff fixed by that award was explicitly foreseeable, that means that there was not really disagreement between the parties to that agreement as to the calculation of that tariff at the time of conclusion of that agreement and that arbitration was not necessary. In other words, by concluding the arbitration agreement, each party accepted to take a certain risk as to the outcome ultimately decided on by the arbitration tribunal.”
Next, the General Court reiterated the reasons why it would be rational for a private operator to agree to an arbitration procedure and also agree to be bound by the outcome of that procedure.
First, DEI and Metlen had held protracted negotiations to fix the tariff in question, without managing to reach agreement on pricing. Moreover, Metlen had stopped paying the bills issued by DEI because it disagreed with the tariff. Nonetheless, DEI was obliged by RAE to continue supplying Metlen with electricity. Arbitration seemed to offer the possibility of resolving that dispute within a relatively short time. A hypothetical private operator in the position of having to provide electricity without compensation would have sought to establish an appropriate price as quickly as possible. [para 190]
Second, the conclusion of an agreement between the two parties on the terms of the arbitration was necessary to bring the proceedings before the arbitration tribunal, as that agreement laid down the rules that the tribunal had to take into account in order to arrive at its decision. A prudent market operator would have also complied with the RAE rules on the referral of a dispute to arbitration. [para 191]
Third, the arbitrators were selected from a list established by RAE and were persons of undeniable experience in the energy field. [para 192]
The General Court also rejected DEI’s argument that the Commission had failed to examine whether the specific tariffs determined by the arbitration tribunal conferred an advantage to Metlen. This is because the Commission’s assessment focused on the reasons for the consent to arbitration rather than the outcome of the arbitration. As explained by the Commission and as accepted by the Court, the outcome of any arbitration procedure is to a certain extent unpredictable and may go against the interest of either party. But it is irrelevant that the outcome may be adverse to a party, given that both parties had agreed on the instructions that were given to the arbitration panel.
In a nutshell, if an arbitration procedure is voluntary and not biased against either of the parties, the outcome is fair and, therefore, free of advantage in the meaning of Article 107(1) TFEU, even if the outcome is not what either party ideally wishes to achieve.
On the basis of the above considerations, the General Court dismissed both appeals.
[1] The full text of the judgment can be accessed at:
