Trying to get away with granting incompatible aid by arguing (ex post) the conformity with the MEIP?

On 20 October 2011 AG Mazák delivered his Opinion in case C-124/10 P “Commission v Électricité de France (EdF) and Others”.[1] The case concerns the appealed by the Commission ruling handed down by the General Court (GC) in case T-156/04 "EdF v Commission" on 15 December 2009. AG Mazák considers the appeal admissible and proposes that the judgment be set aside (as far as Articles 3 and 4 of the Commission Decision are concerned) and the case be referred back to the GC for reconsideration.

The appealed judgment is one of the most debated ones among the recently delivered in the field of EU/EEA State aid law. The GC gave rise to much controversy when it concluded that the Commission had erred in law by denying the application of the Market Economy Investor Principle (MEIP) to a tax waiver while the common ground is that the MEIP does not apply to fiscal measures. Adopting such kind of measure lies within the sole competence of the State (its capacity as public authority) and since no private operator could ever adopt it the applicability of the MEIP is excluded. However, the GC stated that the form of the measure was irrelevant to that issue. On the contrary, one should look at the measure’s nature, its subject-matter and the rules to which it is subject, while taking into account the objective pursued. The Court stated that it could not have been ruled out that the tax exemption had a commercial objective due to being converted into a capital injection.

AG Mazák concludes, however, that the GC erred in its characterisation of the facts when it considered that France had converted a tax claim into capital. Moreover, France and EdF mentioned the alleged application of the MEIP first after 18 months since the Commission had opened the formal investigation procedure. Additionally, in line with the “classic” definition of aid under Article 107(1) TFEU (and Article 61(1) EEA), the objective pursued by the grantor of aid is of no relevance to qualifying a State measure as aid. It is the effect, i.e. the conferred economic advantage that is of sole importance. Furthermore, by allowing the applicability of the MEIP to tax measures the GC disregarded the distinction between the State acting as public authority and private investor, which resulted in distorting the principle of equality of undertakings and endangering legal certainty and transparency. Finally, AG argues that the GC erred in law in finding that the Commission borne the burden of proof as to whether the measure had been taken in conformity with the MEIP. In his opinion it is the Member State, which attempts to rely on the MEIP that has to prove meeting the conditions of conformity with the MEIP. The Judges of the Court of Justice are now beginning their deliberations in this case.

[1] Électricité de France is a public undertaking that produces, transmits and distributes electricity, particularly throughout France. In 1997 its balance sheet was restructured and the resulting from it corporate tax amounting to €888.89 million was waived. The Commission determined the measure to be illegal aid that was to be repaid (€1.217 billion with interest rate). France and EdF argued before the GC that the tax exemption constituted in fact a capital injection (a recapitalization measure being part of the process of restructuring) undertaken in conformity with the MEIP.