1) Selectivity of Health Tests 2) Existing v New Aid in Preferential Electricity Tariffs

A measure can be selective even if it applies to a whole sector. An existing aid measure becomes new when a court extends it temporarily.

 

Introduction

This article reviews two judgments: one on BSE tests in Belgium and another on preferential electricity tariffs in Greece. The issue at hand with respect to the BSE test was whether a measure that was intended to protect human health was selective. In the case of the preferential tariffs the main point of contention was whether they were existing aid or new aid.

1. BSE tests

On 30 June 2016, the Court of Justice ruled in case C‑270/15 P, Belgium v Commission.[1] Belgium appealed against the judgment of the General Court in T-538/11, Belgium v Commission. The General Court had dismissed a request by Belgium to annul Commission decision 2011/678 concerning State aid for financing of BSE tests on bovine meat. The judgment of the General Court was reviewed in an article that was published here on 29 April 2015. Here is a link to that article: http://stateaidhub.eu/blogs/stateaiduncovered/post/2161.

The Commission had found that certain tests constituted incompatible State aid that had to be recovered. Belgium contested the selectivity of its tests and whether they conferred any advantage. The General Court rejected Belgium’s arguments that the tests did not grant a selective advantage. The Court of Justice was asked to address again the issues of advantage and selectivity.

The public funding of the tests conferred an advantage

The Court of Justice first confirmed the principles on which the General Court based its judgment, namely that “34 […] measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or are to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions are regarded as State aid”. “35 […] charges which are normally borne by the budget of an undertaking include, in particular, the additional costs which undertakings normally must bear by virtue of obligations imposed by law, regulation or agreement which apply to an economic activity.”

The Court of Justice concurred that “36 […] such additional costs resulting from obligations imposed, […], by law or regulation inherent in the exercise of a regulated economic activity are, in essence, charges which must normally be borne by the undertakings. The fact that such obligations derive from the public authorities cannot therefore, by itself, have effects on the assessment of the nature of other measures by those same authorities, in order to determine whether they favour undertakings outside of normal market conditions.”

In response to several arguments put forth by Belgium, the Court of Justice pointed out that “38 […] the facts that those charges arise from measures of the public authorities in the exercise of their public powers or that the Member States are free to take on those costs in the absence of harmonisation in the area of financing BSE screening tests have no effect on the categorisation of charges which the undertakings must normally bear.” “39 Moreover, and in any event, the fact that there is no harmonisation on the financing of measures which have become mandatory in the fight against BSE has no bearing on the categorisation of an economic advantage which such financing is likely to constitute. Indeed, it should be borne in mind that, […], even in areas where the Member States have jurisdiction, they must comply with EU law and in particular the requirements of Articles 107 TFEU and 108 TFEU”. “40 Nor can the Kingdom of Belgium successfully argue that […] the public health objective of the obligation to carry out BSE screening tests is not sufficient to rule out the categorisation of the State funding of those tests as State aid. It is settled case-law that Article 107(1) TFEU does not distinguish between measures of State intervention by reference to their causes or their aims but defines them in relation to their effects”.

The tests were selective

The Court of Justice first clarified that “48 the requirement as to selectivity under Article 107(1) TFEU must be clearly distinguished from the concomitant detection of an economic advantage, in that, where the Commission has identified an advantage, understood in a broad sense, as arising directly or indirectly from a particular measure, it is also required to establish that that advantage specifically benefits one or more undertakings. It falls to the Commission to show that the measure, in particular, creates differences between undertakings which, with regard to the objective of the measure, are in a comparable situation. It is necessary therefore that the advantage be granted selectively and that it be liable to place certain undertakings in a more favourable situation than that of others”.

However, “49 […] distinction must be made according to whether the measure in question is envisaged as a general scheme of aid or as individual aid. In the latter case, the identification of the economic advantage is, in principle, sufficient to support the presumption that it is selective. By contrast, when examining a general scheme of aid, it is necessary to identify whether the measure in question, notwithstanding the finding that it confers an advantage of general application, does so to the exclusive benefit of certain undertakings or certain sectors of activity”.

The issue of contention in this case was that the BSE tests benefitted all producers of beef. Belgium was of the view that the fact that the tests covered the whole sector made them a general measure.

The Court of Justice began its analysis of this issue by noting that “51 […] the General Court […] held that the Commission was correct to take the view ‘that operators in the bovine sector benefited from an advantage which was not available for undertakings in other sectors, since the tests which they were required to perform before placing their products on the market or trading in them were provided free of charge, whereas undertakings in other sectors were unable to avail themselves of that possibility, which the Kingdom of Belgium does not dispute’.” “53 […] the situation of operators in the bovine sector was implicitly but necessarily compared to that of all the undertakings which, like them, are subject to inspections which they are required to perform before placing their products on the market.”


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Then the Court of Justice concluded that “54 Although the Kingdom of Belgium maintains that those different sectors are not in a comparable situation since the tests intended to control the quality of products, even food products, vary from one sector to another, in their nature, purpose, cost and timing, such an argument is ineffective in the context of the categorisation of State aid, which relates not to the tests themselves but to their financing by State resources having the effect of alleviating the burden of costs on its beneficiaries. It is undisputed that, […], the Kingdom of Belgium did not dispute before [the General Court] that the operators in the bovine sector benefited, by the financing of the screening tests, from an advantage which was not available to undertakings in other sectors.”

Although the tests benefited all producers of beef, they were still selective not because they did not apply to other sectors, but because the state did not relieve producers in other sectors from the cost of compulsory tests.

The decisive issue was the relief from costs of only producers in one sector. Belgium focused on the type of test and concluded that it was general. The Commission, General Court and Court of Justice focused on the funding of the test and reached the opposite conclusion. The test was selective because similar funding was not available to producers in other sectors.

2. Preferential electricity tariffs

On 26 October 2016, the Court of Justice, in case  C‑590/14 P, DEI v Alouminion and Commission, set aside an earlier judgment of the General Court in case T‑542/11, Alouminion v Commission, and referred the case back to the General Court.[2]

DEI is the incumbent electricity producer in Greece. Alouminion is a producer of aluminium. The case concerned an agreement between DEI and Alouminion. The agreement was signed in 1960 and committed DEI to supply electricity at preferential rates to Alouminion until 2006. The agreement could be extended by mutual consent. In 2004, DEI notified Alouminion of its intention to discontinue the agreement. Alouminion disputed the right of DEI to terminate the agreement before a Greek court. The Greek court ordered the continuation of the agreement as an interim measure until the dispute was adjudicated.

The Commission, in decision 2012/339, found that the continuation of the agreement constituted new State aid [DEI is state-owned] that was incompatible with the internal market. The General Court, however, annulled the Commission decision on the grounds that the ruling of the Greek court was not intended to extend the agreement and to grant new aid to Alouminion but merely to maintain the status quo as an interim measure until the dispute was resolved. The General Court concluded that any aid was existing aid.

Definition of new aid

The Court of Justice first recalled that according to the previous procedural regulation [Regulation 659/1999], new aid was defined as “all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid”. Moreover, Regulation 794/2004 provided that “an alteration to existing aid shall mean any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure with the [internal] market”.

Then the Court observed that “49 the evaluation, by the Commission, of the compatibility of aid with the internal market is based on the assessment of the economic data and of the circumstances on the market at issue at the date on which the Commission makes its decision and takes into account, in particular, the period over which the grant of that aid is provided for. Consequently, the period of validity of existing aid is a factor likely to influence the evaluation, by the Commission, of the compatibility of that aid with the internal market.”

Therefore, “50 extension of the duration of existing aid must be considered to be an alteration of existing aid and therefore, in accordance with Article 1(c) of Regulation No 659/1999, constitutes new aid.”

The Court of Justice went on to conclude that “59 contrary to the General Court’s findings […], by reinstating the application of the preferential tariff during the period at issue, the […] order for interim measures [by the Greek court] had the effect of altering the time limits of application of that tariff, as agreed in the 1960 contract […] the […] order [of the Greek court] for interim measures must, consequently, be regarded as constituting alteration of existing aid.” The General Court had erred in law.

—————————————————————–

[1] The full text of the judgment can be accessed at:

http://curia.europa.eu/juris/document/document.jsf?text=&docid=181102&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=1361732.

[2] The full text of the judgment can be accessed at:

http://curia.europa.eu/juris/document/document.jsf?text=&docid=184859&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=1042544.

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Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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