Executive Summary:
- Compensation for damage caused by the state does not confer an advantage and, therefore, does not constitute state aid.
- Compensation that does not constitute state aid must comply with the general national rules on liability.
Table of Contents:
- Introduction
- Compensation in the context of the Dutch legal framework
- Determination of the compensation
- Commission assessment
- The compensation amount
Introduction
Recently the Commission found that two identical individual Dutch measures that compensated two undertakings did not constitute state aid. The measures concerned electricity companies RWE [SA.109564] and Uniper [SA.121044] . The objective of the measures was to compensate the two companies for their loss of profit as a result of a cap on CO2 emissions imposed by law on coal-fired electricity plants.
As explained in the Commission decisions, in December 2019, the Netherlands decided to prohibit the use of coal for the production of electricity. The prohibition was in the form of an act adopted by parliament. The aim of the act was to phase out the generation of electricity from coal-fired plants by 1 January 2030 in order to reduce CO2 emissions.
The phasing out of the use of coal “(4) would take place according to the following timeline: 1) Plants with an electrical efficiency below 44%, which did not produce electricity from renewable biomass and did not produce heat from renewables were mandated to stop generating electricity from coal by 1 January 2020;
2) Co-firing units which could also generate electricity from renewable biomass or generate heat from renewables with an electrical efficiency of less than 44% were mandated to stop generating electricity from coal by 31 December 2024;
3) Production units with an electrical efficiency of 44% or more were mandated to stop generating electricity from coal before 1 January 2030.”
At the time the coal act was adopted, there were five coal-fired power plants in the Netherlands, namely: Amercentrale, Eemshaven A/B, Power Plant Rotterdam, MPP3 and Hemweg. Hemweg 8, owned by Vattenfall, was mandated to cease generating electricity as of 1 January 2020. The other four plants were allowed to continue operating for a transition period until 1 January 2030.
The purpose of the transition period was to allow those plants to further recover investment expenditure and make profit. They also had the opportunity to try to convert to fuels other than coal.
However, on 20 December 2019 the Dutch Supreme Court ordered the Dutch government to bring about a significant reduction of CO2 emissions as of 2020. Consequently, the coal act was amended and stricter emission limits and tighter schedule were imposed on coal-fired plants, resulting in a partial ban of the use of coal. This partial ban was later only partly enforced because the Russian invasion of Ukraine caused a spike in energy prices, which led to the relaxation of the restrictions on the use of coal. Consequently, the partial ban was enforced only from 1 January 2022 until 21 June 2022.
Three coal power plants operated by RWE [Eemshaven], Uniper [MPP3], and Onyx [Power Plant Rotterdam] requested compensation for lost profits in the period from 1 January 2022 to 21 June 2022. The request of Onyx was rejected on the grounds that it has not lost any profits, but RWE was awarded EUR 331.8 and Uniper EUR 165.3, on condition that the awards would be approved by the Commission.
Compensation in the context of the Dutch legal framework
The Commission decision examined in detail the Dutch legal framework of compensation for damage caused by acts of the state, also in relation to the relevant EU rules on the right to property. It should be recalled that according to the case law of the EU Court of Justice [CJEU], the Commission enjoys exclusive competence to determine the compatibility of state aid and can also interpret Article 107(1) TFEU, subject to the control of the CJEU. In this connection, it may need to take into account national law, but has no competence to interpret national law. It must understand national law as interpreted by national courts.
First, the Commission examined the provisions on the protection of ownership under European law. “(12) Article 1 of Protocol No. 1 of the European Convention of Human Rights (‘ECHR’) and Articles 17 and 52 of the Charter of Fundamental Rights of the EU (‘CFREU’) protect the peaceful enjoyment of possessions. According to the Dutch Constitution, these provisions are directly applicable in the Dutch legal system and therefore the Dutch authorities shall take them into account directly when drafting a legislative measure.”
“(13) According to Article 1 of Protocol No. 1 of the ECHR, the interference with the peaceful enjoyment of property is only allowed if it is prescribed by law, it is in the public interest, and it is necessary in a democratic society in the sense that the measure producing such an interference must strike a fair balance between the general interest of the society and the individual interests of the person concerned. In this regard, the Dutch authorities submit that it is relevant whether a measure is foreseeable. Thus, the Netherlands is entitled to regulate the right of property in relation to the coal-fired power plants by virtue of the common interest of protecting the climate but, in doing so, it must strike a ‘fair balance’ between the general interest the government is pursuing and the individual interest of the owners of the power plants concerned. If a fair balance is not achieved, and the measure fails to comply with the ECHR, the measure may be declared unlawful and it may give rise to a claim for damages.”
Next, the Commission examined national case law and administrative practices in the Netherlands. “(14) The Dutch authorities submit that, in the Netherlands, article 1 of the ECHR is applied directly by the judiciary and there is case-law on the compensation for damages suffered due to State intervention.”
“(15) The case-law further elaborates on the way in which the compensation for damages – if it needs to be awarded – should be calculated. In particular, it recognises that, when determining the compensation amount, a certain margin of appreciation is left to the administration, whose choices should nonetheless be reasonable and acceptable. The compensation should be determined by comparing the situation in which the party finds itself following the intervention of the public authority with the hypothetical situation in which the party would have found itself if the public authority would not have taken a specific action. The loss of turnover, potential savings or additional costs for the party due to the public measure should all be taken into account.”
“(16) Although the case law does not specify a detailed methodology to determine the encountered damage, it does recognise the central role independent experts can play to determine the scale of the damage. According to the Dutch authorities, in general, the judiciary follows the advice of the independent experts to determine the required compensation amount.”
“(17) As regards the context at hand, it is noted that RWE (Eemshaven plant) and Uniper (MPP3 plant) challenged the coal act. The District Court of the Hague, in the respective decisions, found the transition period sufficient, ruling that no compensation was owed under the Dutch Constitution. The Court of Appeal of the Hague, adjudicating on the appeals filed by RWE and Uniper, upheld the judgments of the District Court and, for the assessment of whether the condition of a fair balance was met, took into account (among other elements) the existence of a transition period until 2030 during which the relevant plants could continue to operate without restrictions. The explicit provision of a transition period in the context of the total ban, providing for the possibility of continuing to operate the power plants after 2020 until 2030 without restrictions, reinforces the argument that the partial ban was not foreseeable in the sense that it created an expectation on the part of the operators that their operations would not be further curtailed by law before 2030.”
“(18) In their notification, the Dutch authorities refer to a domestic precedent relating to a case that presents similarities to the present case. In that case, companies involved in mink farming were subject to a production ban for reasons of animal welfare, with a transition period of 11 years until the ban’s entry into force and no initial compensation. Affected companies challenged the measure, but their appeals were rejected by the Dutch Supreme Court. Later on, following the outbreak of COVID-19 in mink farms, the government introduced a new act that shortened the transition period by 3 years due to public health concerns while providing for compensation for the shortened transition period. However, the governmental measure applied a 15% reduction to the compensation that had been calculated taking into account loss of turnover, potential savings and additional costs of the undertaking concerned, as it considered that this was needed to reflect normal business risk. The Trade and Industry Appeals Tribunal (the highest judicial authority in the Netherlands in the field of economic administrative law), in a decision dated 2 October 2025, ruled that there was no legal basis to apply the 15% reduction for normal business risk, in view of, among other things, the shortening of the transitional period (… The company could assume that it would enjoy transitional protection during that transitional period). The reasoning on the affected companies’ expectations during the transitional period can be applied by analogy to the case at hand. In this respect the Dutch authorities put forward that, in the coal plants case, the breach of legitimate expectations of transitional protection would be even more obvious, in the absence of compensation, as the act on the partial ban was introduced for the same public interest goal, namely climate protection, for which the total ban, which included the transitional period, had already been adopted.”
The Commission also examined the legal basis for the compensation. “(19) The legal basis for the compensation are Article 4 paragraph 2 of the coal act, as amended by the act on the partial ban, which foresees the possibility of granting a compensation to an operator who is affected by the partial ban upon request, and Articles 2 and 3 of the Decree on compensation for production limitation of coal-fired power plants …, which provide that the remuneration is the difference between the net present value of expected free cash flows without and with the partial ban. These articles also provide for the components of the compensation and the methodology for calculating the net free cash flow.”
Determination of the compensation
The methodology the calculation of the compensation was as follows. First, the relevant time period was established. That was the period between 1 January 2022 and 20 June 2022.
Compensation was equal to the difference between the net present value of expected free cash flows without and with the partial ban. It was also possible that certain additional costs were eligible, such as contractual losses from contracts concluded before 9 December 2020, additional personnel costs, and reasonable costs to prevent or mitigate damage.
Without the partial ban, the plants were assumed to produce at their foreseeable technical capacity in all hours without the additional restrictions on CO2. Key inputs to the calculation included electricity, coal and CO2 prices and plant-specific efficiency.
To ensure the correctness of the methodology and the objectivity of the calculation, KPMG reviewed both the methodology and the input data.
Although RWE Eemshaven requested compensation amounting to EUR 408,051,534, it was awarded only EUR 331,755,437, of which EUR 318,290,192 corresponded to loss of income and EUR 13,465,245 to interest payments.
“(35) The difference compared to the amount requested by RWE Eemshaven reflects a number of factors, such as: […], the use of the actual efficiency of the plant instead of the efficiency described in RWE Eemshaven environmental permit to which RWE had referred, and the exclusion of certain maintenance-related claims that were not considered to be a direct consequence of the partial ban.”
In the case of Uniper, the requested compensation was EUR 305,333,866, including EUR 5 million in interest compensation. The compensation awarded was only EUR 165,302,988, of which EUR 158,771,157 corresponded to loss of income and EUR 6,531,831 to interest payments. “(35) The difference compared to the amount requested by Uniper reflects a number of factors, such as: […]; discrepancies between the efficiency curve underlying the adjusted request and the simplified model; the correction of efficiency assumptions to reflect the incremental relationship between capacity used and efficiency; the exclusion of certain maintenance-related claims that were not considered a direct consequence of the production limitation; the exclusion of lower production claims for July and August 2022, which are not a direct consequence of the production restriction; the adjustment for reasonably foreseeable technical capacity through a threshold of unused capacity; the recalculation of variable costs to reflect volume effects and reduced absolute costs; the rejection of missed revenues claims from the battery due to lack of evidence; the rejection of loss-of-opportunity claims in coal trading and profit optimisation because they concern the entire group portfolio and cannot be verified as caused by the output reduction; the non-acceptance of project costs due to insufficient substantiation; the application of discounting; the limitation of interest due to delays attributable to Uniper.”
Commission assessment
Since, for a public measure to constitute state aid, all criteria of Article 107(1) TFEU must be satisfied, the Commission examined only whether the Dutch compensation conferred an advantage.
“(48) An advantage, within the meaning of Article 107(1) TFEU, is any economic benefit, which an undertaking could not have obtained under normal market conditions, that is to say in the absence of State intervention.”
“(51) The Commission notes that, in principle, the costs of complying with regulatory obligations for the protection of the environment are part of the normal operating costs of an undertaking. However, it is not excluded that in individual cases, the regulatory obligation can form a special burden that needs to be compensated.”
“(52) In order to determine whether the notified measure confers an advantage to RWE Eemshaven, it would therefore have to be established whether, in such circumstances, the Dutch law gives rise to an obligation to pay compensation to the affected operator and whether the level of compensation under the notified measure is equivalent to what the Netherlands would be ultimately required to grant to RWE Eemshaven as damage compensation, had the matter been brought before the national courts. If the notified measure went beyond the compensation that would be ultimately required under national law, it would grant an advantage to the affected operator and would, thus, constitute State aid, if the other criteria set out in Article 107(1) TFEU were cumulatively fulfilled.”
“(53) The Commission observes that, in the present case, the partial ban on coal-fired electricity generation impinged on RWE Eemshaven’s property rights. Although it does not constitute an expropriation, it constitutes a regulation of property ownership since it affected the way the property could be used.”
“(54) The Commission understands that, in the Dutch legal system, Article 1 of Protocol No. 1 of the ECHR and Articles 17 and 52 of the CFREU can be applied directly by Dutch courts.”
“(55) According to these provisions, restrictions to the use of property must meet three conditions: legality, legitimacy, and proportionality. Measures that do not result in expropriation but only limit the exercise of property rights can in principle be proportionate also without any financial compensation awarded to the property owner whose property rights are affected by the intervention of the State. However, the Commission understands that this does not preclude specific circumstances in which financial compensation may be warranted following limitations of the exercise of property rights.”
“(56) This is, for instance, the case when the limitation of the exercise of the property rights is particularly intrusive and results in exceptional hardship or unreasonable burden on the owner and would thus constitute a disproportionate interference with their right to property in the absence of compensation. In such cases, the State might include in the measure from the outset a compensation mechanism in order to ensure the proportionality of the measure or otherwise could be required to provide compensation if the case was brought before the national courts.”
But then what is the difference between “disproportionate interference” that gives rise to a claim for compensation and compliance with strict regulatory requirements that do not give rise to a similar claim?
At any rate, the Commission went on to note “(57) that the partial ban satisfies the legality and legitimacy criteria as it is based on law and aims to reduce CO₂ emissions, pursuing environmental objectives in the general interest, further to the Urgenda judgment. As to the proportionality and the question whether the absence of compensation for the partial ban would result in an imbalance between the environmental objectives and the financial impact on the plant operators, the following considerations must be taken into account.”
It must be said that the meaning of the “imbalance” is unclear. The electricity generators using coal-fired plants and their shareholders lose money, but society at large breaths cleaner air. It is not obvious how the two effects are compared. Must we assume that there is an imbalance if the monetary loss of the companies exceeds the value of cleaner air?
The Commission recalled that “(58) the partial ban was enforced early on in the course of the transition period that had been granted for the total ban, which was to last until 2030 and had been provided to operators of coal-fired power plants, to allow them to recoup their investments and potentially convert to other generation fuels.”
Even if we accept that by 2030 the companies would have recouped their investments, the plants would not have reached the end of their economic life by 2030. Therefore, the total ban would prevent them from exploiting those plants further. Why did the total ban not give rise to legally valid claims for compensation? The next paragraph suggests that the impact of the total ban was foreseeable. Does foreseeability relieve the state from the obligation to compensate companies whose property rights are restricted?
“(59) In such circumstances, as the Dutch authorities submit …, it was not foreseeable by the operators of the coal-fired power plants that such additional restrictions – through the partial ban – could have been imposed so rapidly following the introduction of the total ban for the same objective of general interest, i.e. reducing CO2 emissions due to environmental considerations, and, a fortiori, in the course of the transition period that had been granted in connection with the total ban, during which the operators were not subject to further related restrictions.”
“(60) It is further recalled that, …, RWE Eemshaven and Uniper had contested in earlier proceedings before the Dutch courts the total ban, claiming that it constituted a disproportionate interference with their property rights for which they were entitled to compensation. However, their claims for compensation were dismissed by the courts taking into account, inter alia, that the granting of the said transition period until 2030 was one of the factors ensuring a fair balance and, thus, the proportionality of the measure. This further supports the conclusion that additional restrictions, such as the ones imposed by the partial ban, would have affected the balance between property rights and pursuance of the general interest, requiring compensation. In light of this, the Commission considers that the partial ban imposed an additional, unexpected burden that could justify the granting of compensation.”
The reference to “fair balance” above suggests a balance between the interests of society and the interests of the two companies. But, then, how was the fairness determined? Is fairness achieved when sufficient transition or adjustment time is granted by the state so the affected undertakings can recoup the cost of the investment they have incurred?
“(61) The domestic precedent relating to the mink farming case mentioned by the Dutch authorities …, where the national courts found that compensation was due in the event of two consecutive restrictions even if they served different goals of public interest (animal welfare v. public health), further supports the conclusion that appropriate compensation would be required in the case at hand to ensure the proportionality of the property restrictions imposed by the partial ban, since the circumstances of the present and the mink farming cases are comparable to a certain extent in that regard.”
“(62) It follows from the above that, in the absence of the notified measure, the beneficiary would have had a right to compensation, enforceable before the Dutch courts.”
Even if the two companies had rights under national law, the Commission is silent on whether the national law was compatible with EU law.
The compensation amount
Lastly, the Commission examined the methodology for the calculation of the compensation amount and the awards themselves.
“(63) Dutch case-law recognises that, when determining the compensation amount, a level of discretion is present and choices need to be made. However, such choices must be reasonable and acceptable, meaning in practice that compensation must be determined by comparing the situation in which the party finds itself following the intervention of the public authority with the situation in which the party would have found itself in the absence of such intervention, taking into account turnover losses, as well as potential savings or additional costs due to the public measure restricting the right to property of the party in question.”
“(64) While the case law does not specify a detailed methodology to that effect, it does recognise the central role independent experts can play in this regard. The Dutch authorities have submitted that, in most cases, the judiciary follows the advice of the independent experts to determine the required compensation amount.”
“(65) The Commission observes that the compensation granted under the notified measure appears in line with the applicable provisions of the Dutch law … and reflects the input of independent experts. It is based on expected costs and revenues that the plant would have incurred if it had continued operating in the period during which the production limitation applied, i.e. from 1 January 2022 to 20 June 2022.”
“(66) The Commission further considers that the assumptions underlying the calculation and the key parameters for the compensation appear realistic and appropriate, so that the compensation amount likely corresponds to what would have been granted if, in the absence of the notified measure, the case had been brought before the national courts.”
“(67) In view of the above, the Commission concludes that RWE Eemshaven would likely be entitled to a financial compensation under applicable national law, the amount of which would have been equivalent to the one established by the notified measure had the case been brought before the national courts. Therefore, RWE Eemshaven is not expected to receive under the notified measure a compensation that goes beyond what is mandated under the national law. Thus, RWE Eemshaven will not receive an advantage which it would not receive under normal market conditions.”
The Commission reached the same conclusion for Uniper.
Therefore, the compensation awarded to RWE and Uniper was free of state aid.
