Orders nº T-468/08 of Court of First Instance of the European Communities, December 23, 2008

• Resolution Date: December 23, 2008
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-468/08

(Application for interim measures – State aid – Commission decision declaring aid awarded by the Republic of Hungary to certain electricity producers through power purchase agreements to be incompatible with the common market – Application for suspension of operation – Lack of urgency – Weighing up of interests)

In Case T‑468/08 R,

AES-Tisza Erőmű kft (AES-Tisza kft), established in Tiszaújváros (Hungary), represented by T. Ottervanger and E. Henny, lawyers,

applicant,

v

Commission of the European Communities, represented by L. Flynn, N. Khan and K. Talabér-Ritz, acting as Agents,

defendant,

APPLICATION for suspension of the operation of Article 1 of Commission Decision C (2008) 2223 final of 4 June 2008 on the State aid awarded by the Republic of Hungary through power purchase agreements,

THE PRESIDENT OF THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

makes the following

Order

Factual background

1 In the mid-1990s, the Republic of Hungary’s main objective in the energy sector was to modernise the infrastructure related to power generation in order to ensure security of supply. In order to achieve that objective, which required substantial capital investments, the State introduced a system of long-term power purchase agreements (‘PPAs’) designed to encourage electricity generators to invest in Hungary. Within the framework of those PPAs, which were concluded between 1995 and 2001, the State-owned undertaking Magyar Villamos Művek (MVM) Rt gave a commitment, as a ‘single buyer’, to purchase a specific quantity of electricity at a fixed price. Those long-term PPAs thus made it possible to guarantee for producers a return on their investments.

2 The Hungarian electricity market has been governed by three consecutive regimes. The first laid down the obligation for MVM to ensure security of supply at the lowest possible cost (1992-2002). The second, which came into force in 2003, introduced a dual model by dividing the market into two sectors: a liberalised sector representing about 30% of production and a public-utility sector, serviced by MVM, representing about 70% of production. Under that regime, energy generators were legally obliged to offer the required capacity to MVM at prices regulated for the public-utility sector. After the implementation of the third regime in 2004, energy producers are still obliged to supply MVM, but price regulation has been abolished, and electricity prices have from then on been determined on the basis of the price formula specified in each PPA.

3 The applicant, AES-Tisza Erőmű kft, is a wholly-owned Hungarian subsidiary of the AES Group, the parent company of which, AES Corporation, is based in the United States. It has generated electricity in Hungary in its Tisza II plant since 1996, when it bought the former State-owned undertaking Tisza as part of the Hungarian Government’s privatisation programme. In that context, the applicant also acquired the long-term PPA previously concluded between Tisza and MVM. The Tisza II plant, which was built between 1972 and 1978, is fuelled primarily by natural gas, with fuel oil as back-up. It is the primary provider of balancing and peak power for the Hungarian system. The AES Group operates two other plants in Hungary, at Borsod and at Tiszapalkonya, which are active in the liberalised sector of the market and thus do not benefit from a long-term PPA.

4 In November 2005, the Commission opened the formal investigation procedure under Article 88(2) EC in respect of the abovementioned long-term PPAs. The Commission had doubts as to the compatibility of those PPAs with the Community scheme for State aid, given that the PPAs shielded the producers concerned from all commercial risks and placed them in a better position than other producers on the market.

5 On 4 June 2008, the Commission adopted Decision C (2008) 2223 final on the State aid granted by the Republic of Hungary through PPAs (‘the contested decision’), the operative part of which reads as follows:

‘Article 1

1. The purchase obligations as defined in the [PPAs] between [MVM] and [the applicant and six other electricity generators] contain State aids within the meaning of Article 87(1) [EC] to the electricity generators.

2. The State aids referred to in Article 1(1) are incompatible with the common market.

3. [The Republic of] Hungary shall refrain from granting the State aids referred to in paragraph 1 within six months following the date of notification of the present Decision.

   Article 2

1. [The Republic of] Hungary shall recover the aid referred to in Article 1 from the beneficiaries.

   …

   Article 3

1. Within two months following notification of this Decision, [the Republic of] Hungary shall submit to the Commission information concerning the measures already taken and planned to comply with this Decision and notably the steps taken to perform an appropriate simulation of the wholesale market in order to establish the amounts to be recovered, the detailed methodology intended to be applied and a detailed description of the set of data that it intends to use for that purpose.

   …

   Article 4

1. The exact amount of aid to be recovered should be calculated by [the Republic of] Hungary on the basis of an appropriate simulation of the wholesale electricity market as it would have stood if none of the [PPAs] referred to in Article 1(1) had been in force since 1 May 2004.

2. Within six months following notification of this Decision, [the Republic of] Hungary shall calculate the amounts to be recovered on the basis of the method referred to in paragraph 1 and submit to the Commission all relevant information with regard to that simulation, notably its results, a detailed description of the applied methodology and of the set of data used to carry out the simulation.

   Article 5

   [The Republic of] Hungary shall ensure that the recovery of the aid referred to in Article 1 is implemented within ten months following the date of notification of this Decision.

   Article 6

   This Decision is addressed to the Republic of Hungary.’

   Procedure and forms of order sought by the parties

   6 By application lodged at the Registry of the Court of First Instance on 21 October 2008, the applicant brought an action for the annulment of the contested decision.

   7 By a separate document lodged at the Registry of the Court of First Instance on the same day, the applicant brought the present application for interim measures, in which it claims, essentially, that the President of the Court of First Instance should:

   – suspend operation of Article 1 of the contested decision, pursuant to Article 105(2) of the Rules of Procedure of the Court of First Instance, until the final order in these interlocutory proceedings and, in any event, until the Court of First Instance has given a ruling in the main action;

   – order the Commission to pay the costs.

   8 In its written observations on the application for interim measures, lodged at the Registry of the Court of First Instance on 14 November 2008, the Commission claims that the President of the Court of First Instance should:

   – dismiss the application for interim relief;

   – order the applicant to pay the costs.

   9 After the Commission had lodged its observations, the applicant was granted leave to submit a reply, which it did by document of 12 December 2008. In that document, the applicant stated, in particular, that its application for suspension of operation concerned Article 1 of the contested decision only in so far as the applicant was itself affected by that provision. The Commission responded to that reply by a document of 18 December 2008.

   Law

   10 Pursuant to Articles 242 EC and 243 EC in conjunction with Article 225(1) EC, the judge hearing an application for interim measures may, if he considers that circumstances so require, order that application of an act against which an action has been brought before the Court of First Instance be suspended or prescribe any necessary interim measures.

   11 Article 104(2) of the Rules of Procedure provides that an application for interim measures must state the subject-matter of the proceedings, the circumstances giving rise to urgency and the pleas of fact and law establishing a prima facie case for the interim measures applied for. Accordingly, suspension of operation and other interim measures may be ordered by the judge hearing the application for interim measures if it is established that such an order is justified, prima facie, in fact and in law and that it is urgent in so far as it must, in order to avoid serious and irreparable harm to the applicant’s interests, be made and produce its effects before a decision is reached in the main action. Those conditions are cumulative, with the result that an application for interim measures must be dismissed if any one of them is absent (order of the President of the Court of Justice in Case C‑268/96 P(R) SCK and FNK v Commission [1996] ECR I‑4971, paragraph 30). Where appropriate, the judge hearing such an application must also weigh up the interests involved (see order of the President of the Court of Justice in Case C‑445/00 R Austria v Council [2001] ECR I‑1461, paragraph 73 and the case-law cited).

   12 Furthermore, in the context of that overall examination, the judge hearing the application enjoys a broad discretion and is free to determine, having regard to the specific circumstances of the case, the manner and order in which those various conditions are to be examined, there being no rule of Community law imposing a pre-established scheme of analysis within which the need to order interim measures must be analysed and assessed (orders of the President of the Court of Justice in Case C‑149/95 P(R) Commission v...