EU court's adviser backs Austria over Paks II state aid
The European Court of Justice's advocate-general says Austria's appeal relating to the legality of Hungary's state aid for the Paks II nuclear power project should be upheld by the court.
The advocate-general Laila Medina says that "Austria is correct in arguing that the Commission, when assessing the aid at issue, should have examined whether the direct award to Nizhny Novgorod Engineering of the contract for the construction of the new reactors is compatible with the European Union’s provisions on public contracts".
The opinion of the advocate-general is not binding on the court - the role is "to propose to the court, in complete independence, a legal solution to the cases for which they are responsible. The judges of the court are now beginning their deliberations in this case. Judgment will be given at a later date".
What is the issue?
In 2017 the European Commission approved Hungary's proposed state aid investment for two new nuclear reactors at the Paks II site, with the construction contract awarded to Nizhny Novgorod Engineering Company Atomenergoproekt (JSC NIAEP) as part of the agreement with Russia which also included Russia agreeing to provide Hungary with a state loan in order to finance the new reactors.
Austria contested that Commission decision, but in 2022 the General Court of the European Union dismissed their case, leading to the current appeal. The advocate-general has now said there was an "inextricable link" between the aid and the construction contract's award and "the Commission is required to take into account, in assessing the compatibility of State aid with the internal market, a possible infringement of provisions of EU law other than those relating to aid".
Although the Commission "may fulfil its obligation to carry out such an examination by referring to infringement proceedings that it has initiated against the Member State concerned and that it has closed after finding that there was no infringement of the relevant provisions" it had "made a mere reference, without setting out, in the contested decision, the considerations which had led it to find that there had been no infringement, that decision did not provide a sufficient statement of reasons on that issue".
The General Court ruling 2022 had said the commission was justified in its view that "it had found that the direct award of the task of constructing the two new reactors to JSC NIAEP did not infringe EU public procurement law".
The Paks II project
The Paks plant, 100 kilometres south of Budapest, currently comprises four Russian-supplied VVER-440 pressurised water reactors, which started up between 1982 and 1987. An inter-governmental agreement was signed in early 2014 for Russian enterprises and their international sub-contractors to supply two VVER-1200 reactors at Paks as well as a Russian state loan of up to EUR10.0 billion (USD10.5 billion) to finance 80% of the project.
The construction licence application was submitted in July 2020, the construction licence was issued in August 2022 and a construction timetable agreed in 2023. First concrete is expected this year, with a target to connect the new units to the grid at the beginning of the 2030s.
Austria, which shares a border with Hungary, has no nuclear power plants. It also launched legal action against the Commission in 2015 over its approval of the UK's support for the Hinkley Point C nuclear power plant project in Somerset, England. The General Court dismissed that lawsuit in July 2018 saying the Commission "did not err" in accepting the UK's stance that construction of the plant was in the British public's interest.
Foreign Minister Peter Szijjarto posted on Facebook on Thursday afternoon that he had spoken on the phone with Rosatom's Director General Alexei Likhachev and said the project was of "critical importance to Hungarian energy security" and was going on "despite constant difficulties and obstacles". Szijjarto, who repeated Hungary's determination to block sanctions affecting the nuclear energy industry, did not specifically refer to the court case in the post which also said "Brussels is constantly trying to hinder our energy cooperation with Russia".
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