delivered on 7 May 2020 (1)

Case C‑594/18 P

(Appeal — State aid — Aid planned by the United Kingdom in favour of Hinkley Point C nuclear power station — Contract for Difference, Secretary of State Agreement and Credit Guarantee — Decision declaring the aid compatible with the internal market — Public interest objective — Investment aid —Operating aid —Article 107(3)(c) TFEU — Article 194(2) TFEU — Article 106a(3) of the Euratom Treaty — Promotion of nuclear energy — Guarantee notice)

1.This case can be described as the legal side of a dispute between Member States that are in favour of nuclear power and those that are not. (2) At the heart of the matter lies the fundamental question of whether the construction of a nuclear power plant can be the subject of a State aid approval by the European Commission for the purposes of Article 107(3)(c) TFEU. That is perhaps the single most important question posed in this appeal from a decision of the General Court delivered on 12 July 2018 in Austria v Commission (3) (‘the judgment under appeal’).

2.In that decision, the General Court dismissed annulment proceedings brought by the Republic of Austria challenging the validity of Commission Decision (EU) 2015/658 of 8 October 2014 (4) (‘the decision at issue’). That decision concerns the provision of financial support by the United Kingdom in respect of the construction of the Hinkley Point C nuclear power station on the south-western coast of England. As might be expected, the details of both the decision at issue and the judgment under appeal are complex: the very fact that the judgment of the General Court runs to some 736 paragraphs speaks for itself.

3.Yet, as I have already indicated, at the very heart of this appeal brought by the Republic of Austria lies its contention that because it (and, for that matter, several other Member States) is resolutely opposed to the construction of nuclear power stations, the granting of aid for such projects by other Member States who support nuclear power is either expressly or implicitly precluded by the various Treaties governing the European Union (including the Euratom Treaty). For its part, the United Kingdom (which has intervened to support the decision at issue) has maintained that it is entitled to choose its own energy policy, including a right to choose ‘between different energy sources and the general structure of its energy supply’ in the manner recognised by the second subparagraph of Article 194(2) TFEU.

4.This Court has only rarely had the occasion itself to pronounce on the correct application of Article 107(3)(c) TFEU, a provision on which the General Court has developed its case-law over the years. Among the questions raised on this appeal, the Court is called on to pronounce on whether State aids must fulfil specific objectives in order to be compatible with the common market in accordance with Article 107(3)(c) TFEU and, if so, what those are. It will further have the occasion to consider whether, in an assessment of State aid for an activity covered by the Euratom Treaty, other aims of the Union as stated in the TEU and the TFEU — in the case at issue, the protection of the environment — have to be taken into account or not.

II. Legal context

5.Articles 107(3)(c), 192(2)(c) and 194(2) TFEU, and Articles 1, 2, 106a(3) and the first paragraph of Article 192 of the Euratom Treaty are the provisions of primary law which form the legal background to this appeal.

6.Article 1(c) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (5) contains the following definition: ‘“new aid” means all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid’.

7.Article 4 of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 (6) reads as follows: ‘1. For the purposes of Article 1(c) of Regulation (EC) No 659/1999, 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 common market. However an increase in the original budget of an existing aid scheme by up to 20% shall not be considered an alteration to existing aid. 2. The following alterations to existing aid shall be notified on the simplified notification form set out in Annex II: (a) increases in the budget of an authorised aid scheme exceeding 20%; (b) prolongation of an existing authorised aid scheme by up to six years, with or without an increase in the budget; (c) tightening of the criteria for the application of an authorised aid scheme, a reduction of aid intensity or a reduction of eligible expenses; 3. The simplified notification procedure shall not be used to notify alterations to aid schemes in respect of which Member States have not submitted annual report ...’

8.Point 3.2 of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (7) (‘the Guarantee Notice’) reads as follows: ‘Regarding an individual State guarantee, the Commission considers that the fulfilment of all the following conditions will be sufficient to rule out the presence of State aid. (a) The borrower is not in financial difficulty. (b) The extent of the guarantee can be properly measured when it is granted. This means that the guarantee must be linked to a specific financial transaction, for a fixed maximum amount and limited in time. (c) The guarantee does not cover more than 80% of the outstanding loan or other financial obligation; this limitation does not apply to guarantees covering debt securities. (d) A market-oriented price is paid for the guarantee.’

9.Points 5.1 and 5.2 of the Guarantee Notice provide as follows: ‘5.1 General State guarantees within the scope of Article 87(1) [EC (now Article 107(1) TFEU)] must be examined by the Commission with a view to determining whether or not they are compatible with the common market. Before such assessment of compatibility can be made, the beneficiary of the aid must be identified. 5.2. Assessment Whether or not this aid is compatible with the common market will be examined by the Commission according to the same rules as are applied to aid measures taking other forms. ...’

III. Background to the dispute

10.On 22 October 2013, the United Kingdom of Great Britain and Northern Ireland notified measures in support of a new nuclear power station to be located at Hinkley Point C, next to two existing nuclear power stations, known as Hinkley Point A and Hinkley Point B (‘Hinkley Point C’). The beneficiary of the notified measures is a company entitled NNB Generation Company Limited (‘NNBG’), which is itself a subsidiary of EDF Energy plc (‘EDF’).

11.The measures that were notified and which are described in detail in Section 2 of the decision at issue, are the following: (a) A contractual agreement aimed at providing price stability for the sale of the electricity produced at Hinkley Point C. The basic concept of that contract is as follows: NNBG will either receive or have to pay the difference between a pre-determined strike price, calculated on the basis of NNBG’s projected construction and operating costs, including a reasonable profit, (8) and a reference price set by the United Kingdom for all operators providing energy in the same segment (9) that are supported by such a measure (‘the Contract for Difference’). The contract further contains a ‘gain-share’ mechanism. It is entered into between NNBG and Low Carbon Contracts Company Ltd, an entity that is to be funded through the imposition of a statutory obligation on all the licensed electricity suppliers.

–Furthermore, NNBG will be protected and may recover costs for certain legislative changes and NNBG and its investors will receive compensation in case of an early shutdown for political reasons (10) or for reasons linked to the unavailability of nuclear third-party liability insurance. In such cases NNBG may be transferred to the United Kingdom Government.

–The abovementioned right of NNBG’s investors to receive compensation in case of a shutdown for political reasons is accompanied by a guarantee agreement to be concluded between the Secretary of State for Energy and Climate Change and NNBG’s investors, according to which the Secretary of State will pay the agreed compensation in case the Low Carbon Contracts Company Ltd should not be able to do so (‘Secretary of State Agreement’).

–The United Kingdom will guarantee bonds to be issued by NNBG in order to finance the investment. The guarantee covers the timely payment of principal and interest of qualifying debt and could reach up to 17 billion pounds sterling (GBP) (‘Credit Guarantee’).

12.By its decision of 18 December 2013, (11) the Commission decided to initiate a formal investigation procedure in respect of the measures notified.

13.That procedure led to the adoption of the decision at issue by the Commission on 8 October 2014. In that decision, the Commission stated that the notified measures constituted State aid but that the measures were also compatible with the internal market according to Article 107(3)(c) TFEU.

14.The operative part of the decision at issue reads as follows: ‘Article 1 Aid to Hinkley Point C in the form of a Contract for Difference, the Secretary of State Agreement and a Credit Guarantee, as well as all related elements, which the UK is planning to implement, is compatible with the internal market within the meaning of Article 107(3)(c) [TFEU]. Implementation of the aid is accordingly authorised. ...’

15.By application lodged with the registry of the General Court on 6 July 2015, the Republic of Austria brought an action for the annulment of the decision at issue. By decision of the President of the Chamber of 18 December 2015, the Grand Duchy of Luxembourg was granted leave to intervene in support of the Republic of Austria. By decisions of the President of the Chamber of 9 December 2015, of 6 January 2016 and of 11 January 2016, the Czech Republic, the French Republic, Hungary, the Republic of Poland, Romania, the Slovak Republic and the United Kingdom of Great Britain and Northern Ireland were granted leave to intervene in support of the Commission.

16.In support of its action before the General Court, the Republic of Austria raised ten pleas in law.

17.By the judgment under appeal, the General Court dismissed the action in its entirety. It ordered the Republic of Austria to bear its own costs and to pay those incurred by the European Commission. The intervening parties were ordered to bear their own costs.

18.The Republic of Austria claims that the Court should:

–set aside in full the judgment under appeal;

–grant, in its entirety, the application at first instance for annulment of the decision at issue;

–order the European Commission to pay the costs.

19.The Grand Duchy of Luxembourg supports the form of order sought by the Republic of Austria.

The Commission claims that the Court should:

–dismiss the appeal;

–order the Republic of Austria to pay the costs.

21.The Czech Republic and the Slovak Republic fully support the form of order sought by the Commission. The French Republic, Hungary, the Republic of Poland and the United Kingdom support the order to dismiss the appeal sought by the Commission.

22.Written observations on the appeal were submitted by all the parties intervening in the first instance, except Romania. The Czech Republic, French Republic, Hungary, the Republic of Austria, and the United Kingdom as well as the Commission presented oral arguments before the Court at the hearing on 28 January 2020.

23.The United Kingdom left the European Union at midnight (CET) on 31 January 2020. Given that the proceedings in the present case were not brought against the United Kingdom, that does not, as such, directly affect the proceedings in any way. It may be noted, however, that pursuant to Article 89 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, (12) the judgment of this Court will continue to have binding force in its entirety on and in the United Kingdom, if it is handed down before the end of the transition period.

24.In any event, the Republic of Austria is clearly entitled to seek the annulment of the judgment under appeal.

25.The present appeal to this Court has been condensed into five separate pleas in law, albeit that these largely replicate the various grounds which were before the General Court. It may be noted, however, that certain pleas challenging the decision at issue, which were advanced by the Republic of Austria before the General Court, are no longer being pursued.

26.By its first plea in law, the Republic of Austria claims that the building of a new nuclear power station is not a legitimate objective in the interest of the Union that can be pursued by State aid. For this purpose, it challenges paragraphs 79 et seq., 97 and 517 of the judgment under appeal. By its second plea in law, the Republic of Austria claims that the General Court erred in law when it considered, in paragraphs 105, 139, 140, 144, 151 and 240 of the judgment under appeal, that the measures at issue are compatible with Article 107(3)(c) TFEU, as the economic activity concerned had not been defined correctly and it failed to recognise that a market failure is a requirement for an aid to be compatible with the internal market. By its third plea in law, the Republic of Austria challenges the General Court’s assessment in paragraphs 405, 413, 470, 499, 506, 507, 515 et seq. of the judgment under appeal in so far as the General Court considered the aid measures to be proportionate. By its fourth plea in law, the Republic of Austria claims that the aid constitutes operating aid which is contrary to the EU rules on State aid, thus challenging paragraphs 612 and 613 of the judgment under appeal. By its fifth plea in law, the Republic of Austria considers, on the one hand, that the decision at issue did not sufficiently determine the aid elements to make it possible to apply the proportionality test and, on the other hand, that the decision at issue is in breach of the Guarantee Notice. In that respect, it takes issue with paragraphs 251 et seq., 279 and 361 of the judgment under appeal, in which the General Court rejected the application of guidelines and regulations that are not directly applicable in application of the principles of equal treatment and non-discrimination, as well as paragraphs 309 and 338 of the judgment under appeal with regard to the application of the Guarantee Notice.

27.I propose now to deal with the different pleas in law in turn.

(a) Summary of the Republic of Austria’s arguments

28.The first plea in law is divided into three parts. First, the Republic of Austria argues that the General Court, in paragraph 79 et seq. of the judgment under appeal, assumed incorrectly that, for the question whether the support of nuclear power is an interest that can be pursued by State aid, the relevant criterion is whether the interest pursued constitutes a ‘public interest’ rather than whether it constitutes a ‘common interest’. Based on that assessment, the General Court erred in law when it considered the aid to be compatible with the internal market merely because it serves a public interest.

29.In that assessment, the Republic of Austria argues that the General Court departed from the practice of the Commission as well as established case-law according to which all State aid has to pursue a ‘common interest’ of the Union. The Republic of Austria further contends that a common interest of the Union is an interest which is common to all Member States.

30.In the second part of its first plea in law, the Republic of Austria argues that the General Court erred when it found in paragraph 97 of the judgment under appeal that Article 2(c) of the Euratom Treaty can be relied on to justify State aid for investment in the field of nuclear energy. The wording of that provision does not encompass the creation of new nuclear energy generating capacity but only aims ‘to facilitate investment and ensure … the establishment of the basic installations necessary for the development of nuclear energy in the Community’. Nor does Chapter IV of the Euratom Treaty (‘Investment’) mention State aid as a measure envisaged to achieve that aim.

31.In the third part of its first plea in law, the Republic of Austria criticises the General Court’s reliance on Article 106a of the Euratom Treaty when it applied Article 107 TFEU, on the basis that the Euratom Treaty does not contain any rules dealing with State aid. Given that the General Court applied Article 107(3)(c) TFEU to a situation governed by the Euratom Treaty, it should also have taken into consideration other provisions of EU law outside the Euratom Treaty. The provisions in question are those on the protection of the environment — which encompasses the protection of health — namely Article 37 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and Article 11 TFEU and, more specifically, ‘in the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment … [the promotion] of energy efficiency and energy saving and the development of new and renewable forms of energy’, as specifically singled out as aims of the Union policy on energy in Article 194(1)(c) TFEU. It also points to the fact that the General Court did not take those objectives into account, something which it maintains runs counter to the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability. In that respect, the Republic of Austria challenges paragraph 516 of the judgment under appeal.

It is next necessary to deal with the Commission’s argument that the first plea in law is ineffective. In support of that argument, it relies on paragraph 85 of the judgment under appeal and the fact that that part of the judgment was not attacked by the Republic of Austria. (19) The Commission claims that the question of whether a ‘common interest’ or a ‘public interest’ has to be served by an aid measure is immaterial because the General Court stated in that paragraph that it is necessary for the application of Article 107(3)(c) TFEU to distinguish between the objective pursued by a Member State and the condition that State aid must not adversely affect trading conditions to an extent contrary to the common interest. Relying on that paragraph, the Commission argues that the General Court did not consider that the aid, in order to be admissible according to Article 107(3)(c) TFEU, had to pursue a public interest. Thus, if the Republic of Austria claims that the correct criterion should have been a ‘common interest’ rather than a ‘public interest’ test, the Commission contends that the General Court applied neither test in its judgment.

For my part, I do not agree with that assessment. In paragraph 87 of the judgment under appeal the General Court stated ‘… it cannot be inferred from this that the public interest objectives that may be pursued by a Member State are limited to those that are common to all or the majority of the Member States’. (20) It thus implies that it is considering the purpose of an aid measure, which, in its opinion, must be to pursue a public interest. Nor would the General Court have had to ‘requalify’ the term ‘common interest’ used in its judgment in Mediaset v Commission (21) to mean ‘public interest’, as opposed to ‘private interest’, (22) if it did not consider that criterion material. (23)

Nor can I agree with the Commission’s claim that the General Court did not rely on a separate criterion that stipulates that the aid in question has to further a ‘public interest’ because the facilitation of the development of ‘certain economic activities’ — the requirement that is set out directly in the wording of Article 107(3)(c) TFEU — per se constitutes that ‘public interest’ or, indeed, that the terms ‘common interest’ and ‘public interest’ are synonymous. To give just three examples: First, in paragraph 48 of the judgment under appeal, the General Court stated ‘in order to be capable of being declared compatible with the internal market pursuant to Article 107(3)(c) TFEU, aid must be aimed at the development of an activity that constitutes a public interest objective’. (24) Second, in the next paragraph, the Court considers that it is appropriate first to examine the public interest objective relied on by the United Kingdom.

Third, in its reference to its judgment in Mediaset v Commission, (25) the General Court made it clear that it did rely on that requirement, if only to exclude ‘private interests’. (26) In paragraphs 79 to 128 of the judgment under appeal, headed ‘The arguments calling in question the Commission’s conclusion that the promotion of nuclear energy constitutes an objective of “common” interest’, alone, the term ‘public interest objective’ was used 16 times — interestingly, even when referring to the decision at issue where the Commission refers to ‘an objective of common interest’. (27) In those references, the General Court dealt with the question of whether the promotion of nuclear energy pursues an objective of public interest for the purposes of Article 107(3)(c) TFEU and not whether that might be a private rather than a public interest. While the Commission might be correct to say that Article 107(3)(c) TFEU does not stipulate that an aid must serve a public interest in order to be compatible with the internal market, that proposition was not expressly endorsed by the General Court in the judgment under appeal.

It follows that I do not consider the first plea in law to be inoperative on this ground. It is rather a plea with which the Court must properly deal.

(3) ‘Public interest’ or ‘common interest’ as requirements of Article 107(3)(c) TFEU

The Republic of Austria basically argues that, in order for Article 107(3)(c) TFEU to apply, an aid measure has to pursue a ‘common interest’ and that that can only be considered to be the case if all Member States support that interest. The General Court took the opposite view in paragraph 79 et seq. of the judgment under appeal. There are two aspects to this matter. First, whether Article 107(3)(c) TFEU has an additional requirement that is not contained in its wording, namely, that the aid must pursue a ‘common interest’ and, if that is so, what constitutes such a ‘common interest’. Second, if the existence of such an additional requirement can be established, there is the further question of whether that ‘common interest’ must be considered from the point of view of all Member States.

When assessing these questions, it must be kept in mind that this Court has consistently held that the Commission enjoys a wide discretion in respect of any examination under Article 107(3)(c) TFEU in respect of whether the State aid in question is compatible with the internal market. Any such exercise which involves economic and social assessments must necessarily be made in a Community context. (28) As a result, judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with, and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers. (29)

With respect to this wide discretion, I would first like to deal with the Republic of Austria’s argument that, in only requiring that the measure supported by State aid furthers a ‘public interest’ rather than a ‘common interest’, the General Court departed from the Commission’s practice as well as from the majority of the case-law. In support of the first submission, the Republic of Austria cites a number of soft law instruments, none of which is, however, applicable to the present case. (30) It further refers to the decision at issue, which indeed deals with the question of whether the aid furthers a ‘common interest’ in its Chapter 9.2. (31) In support of the second submission, it cites the judgments of this Court in Philip Morris Holland v Commission, (32) Deufil v Commission (33) and Spain v Commission. (34)

As the Commission has no competence to legislate in the area of State aid, it obviously follows that any notices, guidelines and frameworks cannot be binding in themselves. If the notices and guidelines to which the Republic of Austria refers were applicable to the set of circumstances in this case, then they might indeed impose a limit on the exercise of the Commission’s discretion. (35) However, even then, the Commission is only bound to the extent that those texts do not depart from the proper application of the rules in the TFEU, as guidelines and notices emanating from the Commission can obviously not derogate from those Treaty provisions. (36)

All of this means that even a consistent position of the Commission on the question of what constitutes an objective of ‘common interest’ could not prevent the General Court (or, as the case may be, this Court) from holding that that is not a necessary requirement in the application of Article 107(3)(c) TFEU. As for the case-law cited by the Republic of Austria, I propose to examine the question of whether any requirement that the aid must serve an objective of ‘common interest’ constitutes a departure from earlier case-law together with the question whether, for an interest to be considered a ‘common interest’, all Member States must agree on it at any given time. (37)

With regard to the proper application of Article 107(3)(c) TFEU, that provision states that a State aid may be compatible with the common market if (i) it facilitates certain economic activities and (ii) such aid does not adversely affect trading conditions to an extent contrary to the common interest. The wording of Article 107(3)(c) TFEU itself does not give any indication in respect of any further requirements with which those ‘economic activities’ must comply. That provision stands in obvious contrast with Article 107(3)(b) TFEU, in that the latter provision clearly qualifies the aid as having ‘to promote the execution of an important project of common European interest’. (38)

The General Court has nevertheless held in various cases, on which the Republic of Austria relies, that ‘in order to be compatible with the common market for the purposes of [Article 107(3)(c) TFEU], aid must pursue an objective in the common interest and must be necessary and proportionate for that purpose’. (39) As for the Commission, in its decision to initiate the investigation, it devoted 31 paragraphs to a consideration of the question of whether the aid pursued a common objective and, in the decision at issue, Section 9.2 dealt with the question and ended with the assessment that, ‘aid measures aimed at promoting nuclear energy pursue an objective of common interest …’. (40)

It is, of course, true that each Member State is not obliged either to permit the operation of nuclear power plants or to provide financial support to such plants if they already exist on their own territory. That, however, is not quite the point. If a Member State takes steps towards ‘the … establishment and growth of nuclear industries’ (44) by building nuclear power plants, it is acting in accordance with an express provision (Article 1 in conjunction with Article 192 of the Euratom Treaty) of the primary law of the Union, which, again almost by definition, necessarily amounts to a matter of ‘common interest’ for the purposes of the State aid rules. The Republic of Austria contends, however, that the case-law regarding Article 107(3)(c) TFEU relies on a common, collective interest of the Member States or the Union respectively, which it says is necessarily absent by reason of its own opposition to the contemporary development of nuclear power. To that end, it relies on three decisions of the Court which it says support that position. As the Republic of Austria relies on the same passages of the same decisions for its assertion that it would constitute a departure from earlier case-law if this Court did not apply the criterion that the aid has to serve a common interest, I will deal with that matter at the same time.

So far as the first of those decisions, the judgment in Philip Morris Holland v Commission, (45) is concerned, the Republic of Austria relies on the following passage (in paragraphs 24 to 26 of that judgment):

‘It should be borne in mind that the Commission has a discretion the exercise of which involves economic and social assessments which must be made in a Community context.

…

… The Commission’s assessment is based, for the most part, on the finding that the increase in the production of cigarettes envisaged would be exported to the other Member States … this did not permit the view that trading conditions would remain unaffected by this aid to an extent contrary to the common interest.’

That passage is concerned with the application of the negative condition of Article 92(3)(c) EEC (now Article 107(3)(c) TFEU). The question presented here is whether the aid in question interferes with trade to an unacceptable degree and in that context the impact on the single market as a whole is naturally to be considered. The question which this Court is required to consider in this case — namely, whether the aid has to serve an objective of common interest — is, however, naturally anterior to that particular question. Even if one were to assume differently, in determining the issue of common interest, there is nothing in that judgment to suggest that it is necessary to consider the individual policy objectives of each Member State.

The same can be said of the second decision relied on for this purpose, the judgment in Deufil v Commission. (46) In that case, the Commission had rejected a proposal for regional aid to develop a particular economic sector in Germany. The Court first reiterated (in paragraph 18 of that judgment) the statement made in paragraph 24 of the judgment in Philip Morris Holland v Commission. (47) The Court then went on to state:

‘The Commission in no way exceeded the limits of its discretion by considering that the granting of aid for an investment which increases production capacity in a sector in which there is already considerable overproduction is contrary to the common interest …’ (48)

Those passages are, however, entirely unexceptionable in that the reiteration of the formula used in Philip Morris Holland v Commission (49) again concerns the application of the negative condition of Article 92(3)(c) EEC (now Article 107(3)(c) TFEU), as distinct from the separate question of ‘common interest’, which is a positive condition dealing with the question of whether the aid serves a purpose of common interest. While the Court admittedly stated that the aid ‘is contrary to the common interest’, that, however, must be seen in the specific context of another explicit criterion contained in Article 92(3)(c) EEC (now Article 107(3)(c) TFEU). In other words, the proposed State aid in question already failed the relevant test because aid for a sector in which there is already overproduction could not be said to ‘facilitate the development of a certain economic area’. There is, in any event, nothing in that passage which suggests that a common interest must be shared by all of the other Member States.

The third decision, the judgment in Kingdom of Spain v Commission, (50) concerned a Spanish aid scheme for farmers located in the autonomous community of Extremadura. The Republic of Austria relies in particular on paragraph 67 of that judgment, which once again restates paragraph 24 of the judgment in Philip Morris Holland v. Commission. (51) The relevant passage from Kingdom of Spain v Commission (52) is in the following terms:

‘Nevertheless, the difference in wording between Article 87(3)(a) EC and Article 87(3)(c) EC cannot lead to the conclusion that the Commission should take no account of the Community interest when applying Article 87(3)(a), and that it must confine itself to verifying the specifically regional impact of the measures involved, without assessing their impact on the relevant market or markets in the Community as a whole. In such cases the Commission is bound not only to verify that the measures are such as to contribute effectively to the economic development of the regions concerned, but also to evaluate the impact of the aid on trade between Member States, and in particular to assess the sectorial repercussions they may have at Community level. As the Court has already held, Article 87(3) EC gives the Commission a discretion the exercise of which involves economic and social assessments which must be made in a Community context.’

But it is clear that that passage once again relates to the quite separate issue which arises under the negative condition contained in Article 107(3)(c) TFEU (formerly Article 87(3)(c) EC), namely, that there must be no impact of the aid in question on the relevant market or markets in the Community (now Union) as a whole to an extent that is contrary to the common interest. That, however, has no bearing at all on either the distinct issue of whether the aid must serve an objective of common interest or be supported by all the Member States before it can qualify as an object of common interest.

It follows that none of those three judgments is an authority for the Republic of Austria’s assertion that it is a necessary requirement for the purposes of Article 107(3)(c) TFEU that the aid pursues an objective of common interest. Nor do they state that a common interest is an interest shared by all Member States.

It must also be borne in mind that all Member States have signed, ratified and acceded to the Euratom Treaty. It follows that all of the Member States must be understood, as a matter of law, to have given their general consent to the development of new nuclear power plants. It is true that there are Member States — such as the Republic of Austria — that have decided that they will not facilitate or even permit the development of new nuclear power plants in their own territory. However, by accepting the objectives of that treaty, they have thereby signified their unqualified acceptance — in principle, at least — of the right of other Member States to develop nuclear power plants on their own territories should they wish to do so.

It follows, therefore, on any view of the legal issues involved, that the development of nuclear power plants is an objective in the common interest for the purposes of Article 107(3)(c) TFEU to which, as it happens, all the Member States have — if only by reason of their acceptance of the Euratom Treaty — consented. Thus, even on the assumption (contrary to my own view) that Article 107(3)(c) TFEU can only be applied if a State aid pursues an objective of common interest, the General Court has not committed any error of law. I would also add — if only for the sake of completeness — that the development of nuclear power plants also constitutes an objective of public interest, as opposed to one of private interest.

(c) The construction of nuclear power stations is not a promotion of nuclear energy covered by the Euratom Treaty

The Republic of Austria further challenges the General Court’s finding in paragraph 97 of the judgment under appeal that, having regard to Article 1(2) and Article 2(c) of the Euratom Treaty, the United Kingdom was entitled to create incentives for the creation of new nuclear energy generating capacities. By contrast, the Republic of Austria claims, relying on the wording of Article 2(c) of the Euratom Treaty, that that Treaty does not cover the promotion of the building of further nuclear power plants or the replacement of existing nuclear power plants by more modern, already developed, technologies. In that context, it may first be observed that Article 1 of the Euratom Treaty declares that the key object of the Treaty is to create ‘the conditions necessary for the speedy establishment and growth of nuclear industries’. Article 2(c) then provides that in order ‘to perform its task’ Euratom shall ‘facilitate investment and ensure, particularly by encouraging ventures on the part of undertakings, the establishment of the basic installations necessary for the development of nuclear energy in the Community’. Beyond that, Articles 40 and 41 of the Euratom Treaty, when read in conjunction with point No. 11 of Annex II to that Treaty, also underline the fact that the investment in nuclear reactors is envisaged by that Treaty. Finally, according to Article 192 of the Euratom Treaty, Member States shall facilitate the achievement of the Community’s tasks.

Perhaps the first thing to say about those general provisions is that they necessarily presuppose the existence of nuclear power stations in at least some of the Member States, for without nuclear power plants there can be no nuclear energy, and without nuclear energy there would be little point in having Euratom or, for that matter, the Euratom Treaty.

Second, the Member States obviously intended that the Euratom Treaty would be a living document, capable of organic development and adaptation to contemporary circumstances, within, of course, the four corners of that Treaty. That in itself is, I think, sufficient to dispose of the argument advanced by the Republic of Austria to the effect that those provisions of the Euratom Treaty do not cover either the building of further nuclear power plants or the replacement and modernisation of ageing plants by more modern, already developed, technologies.

If that argument were correct, it would mean, for example, that the Euratom Treaty would have applied only during the first phase of the construction of nuclear power plants during the 1960s and 1970s. It would also follow that the Euratom Treaty would have no application to modern circumstances, as that first wave of nuclear plants would gradually be decommissioned, modernised and replaced. Yet the drafters of the Euratom Treaty obviously intended that it would have indefinite application. There is no indication at all that it was supposed simply to have a finite scope of application confined, essentially, to the first wave of nuclear power plant construction.

Third, in any event, that argument of the Republic of Austria is not supported by the actual language of the Euratom Treaty itself. After all, Article 1 declares that one of the objectives of the Treaty is to create the conditions necessary ‘for the speedy establishment and growth of nuclear industries’. In the same vein, Article 2(c) of that Treaty declares that one of the tasks of Euratom is to ensure, ‘particularly by encouraging ventures on the part of undertakings, the establishment of the basic installations necessary for the development of nuclear energy in the Community’. Those provisions quite obviously contemplate the growth and development of the nuclear industry, including — as Article 2(c) makes clear — through the involvement of private undertakings for that purpose. The argument to the contrary advanced by the Republic of Austria at the oral hearing on 28 January 2020 to the effect that Article 2(c) of the Euratom Treaty did not bear that meaning at all, but was instead concerned with the possible development of new technologies is, with respect, quite unrealistic.

Finally, it is also again necessary to point to Article 194(2) TFEU in this context. That provision must, of course, be read in conjunction with the Euratom Treaty. As I have already indicated, the second subparagraph of Article 194(2) TFEU provides that the general competence of the Union in the field of energy will not prejudice the right of a Member State ‘to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply’.

It is perfectly clear from that provision that the right in principle of each Member State to choose its own energy mix — whether it be fossil fuels, renewables such as solar energy and wind power or, as here, nuclear power — is, for all intents and purposes, inviolate. As the United Kingdom argued in its submissions, it has elected to support nuclear energy as a ‘reliable, low carbon element within its wider energy mix’.

All of this reinforces the conclusion that the objects and competences of the Euratom Treaty may be fairly interpreted as extending to the construction of modern nuclear power plants by the Member States, and not simply those plants which were envisaged or projected at the time when the Euratom Treaty was promulgated. The general tenor and approach of the General Court in the judgment under appeal is perfectly consistent with this interpretation of those provisions.

(d) When determining whether aid measures promote an objective of common interest, the General Court should also have had regard to other objectives of the TFEU

In paragraph 517 of the judgment under appeal, which is challenged by the Republic of Austria, the General Court held that, irrespective of whether those principles had to be taken into account by the Commission, it would be inconsistent with Article 106a(3) of the Euratom Treaty to interpret the principle of protection of the environment, the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability in such a way as to preclude the grant of State aid in respect of the construction or operation of a nuclear power plant.

The Republic of Austria, on the other hand, argues that, if — in spite of Article 106a(3) of the Euratom Treaty — one applies Article 107 TFEU to nuclear power, one must also apply other principles of EU law, such as environmental protection requirements, which encompass the protection of health, referred to in Article 37 of the Charter and Article 11 TFEU. Furthermore, the Republic of Austria argues that Article 106a(3) of the Euratom Treaty should not be relied on to justify State aid because that provision primarily deals with conflicts regarding the legal basis for legislative action, a conflict which does not exist in the present case. Those arguments invite the following response.

First, contrary to what is the case for the area of State aid, the Euratom Treaty deals with environmental issues in Chapter 3 of Title II, entitled ‘Health and Safety’. (53) Those provisions take precedence according to Article 106a(3) of the Euratom Treaty and leave no room for the application of other principles of EU law in that area. (54)

Second, the fact that a provision might have been primarily conceived to deal with conflicts regarding the legal basis for measures does not exclude its application to other questions. This is so, particularly, as neither the wording of Article 106a(3) of the Euratom Treaty, nor its context — it was moved from Part six of the EC Treaty dealing with general and final provisions to the chapter in the Euratom Treaty, headed ‘Application of certain provisions of the Treaty on European Union and of the Treaty on the Functioning of the European Union’ — bear out such a limitation in its application.

Third, Article 106a(3) of the Euratom Treaty is not the only provision that has to be taken into account when it comes to the energy supply of the Member States. If the Commission were given a broader competence to assess State aid decisions made by Member States according to principles other than those set out in Article 107 TFEU, that would clearly limit the Member States’ autonomy in that area. The question then is whether the Treaties actually allow for that. The area of ‘Energy’ is dealt with in Title XXI of the TFEU. According to Article 4(2)(i) TFEU, that is an area of shared competence between the Union and the Member States. Article 194(1) TFEU and the first subparagraph of Article 194(2) TFEU oblige the European Parliament and the Council to establish the measures necessary to achieve certain aims related to the energy sector ‘in the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment’. As I have already pointed out, Article 194(2) TFEU also states clearly that ‘such measures shall not affect a Member State’s right to determine … its choice between different energy sources …’. (55)

What emerges from this is that the Member States’ room for manoeuvre when it comes to their energy supply must be preserved and acknowledged. To this extent, Article 194(2) TFEU represents an important rebalancing of the role of the individual Member States vis-à-vis the Union in the field of energy policy. Therefore, for those reasons alone it does not seem appropriate to allow the Commission to consider Union objectives beyond the protection of the common market specifically raised in Article 107(3)(c) TFEU in its assessment of a State aid in the energy sector. (56)

Nor does the case-law of the Court and the General Court, even in areas outside the energy sector, require or empower the Commission to do so.

The specific principles raised by the Republic of Austria, which, according to it, ought already to have been taken into account at the time of the assessment as to whether an objective of common interest was being pursued by the aid measure, are the protection of the environment, the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability. However, as the General Court pointed out correctly in paragraph 515 of the judgment under appeal, the Commission would only have had to take those principles into account if they had actually been pursued by the United Kingdom with its aid measure. (57) In that case, they could have been examined by the Commission by reference to whether the measures were adequate to reach that goal. (58) In the present case however, the aim pursued was to facilitate the production of nuclear energy and the Commission, according to Article 107(3)(c) TFEU, only had to assess whether the measure adversely affected trading conditions to an extent contrary to the common interest. (59)

Nor does the following case-law alter that conclusion: the Court has held that, when the Commission applies the State aid procedure, it is required, in accordance with the general scheme of the Treaty, to ensure that provisions governing State aid are applied consistently with specific provisions other than those relating to State aid and, therefore, to assess the compatibility of the aid in question with those specific provisions, where the aspects of aid are so inextricably linked to the object of the aid that it is impossible to evaluate them separately. (60) In the present case, the existence of such an inextricable link was, as the Commission points out, not raised by the Republic of Austria; nor does it exist. The principles raised by the Republic of Austria, namely, the protection of the environment, the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability, can be assessed separately and, should it prove necessary, in other proceedings. (61) It bears mentioning that, according to paragraph 150 of the Commission’s response, the Republic of Austria did not attack the further decision on the pricing methodology for nuclear waste contracts which were also considered to be State aid and declared to be compatible with the internal market in accordance with Article 107(3)(c) TFEU. (62)

The General Court did not commit any error of law in finding that it did not have to have regard to other objectives of the Treaties in determining whether the aid measures promote an objective of common interest.

(a) Summary of the Republic of Austria’s arguments

In paragraphs 105, 139 and 140 and 144 of the judgment under appeal, the General Court held that the promotion of nuclear energy constituted the relevant economic activity for the purposes of Article 107(3)(c) TFEU and that the development of Hinkley Point C constitutes such a promotion of nuclear energy. In paragraphs 151 and 240 of the judgment under appeal, the General Court held that the existence of a market failure may be a relevant factor for declaring State aid compatible with the internal market, but that the absence of market failure does not necessarily mean that the conditions laid down in Article 107(3)(c) TFEU are not satisfied and that, even if there were no market failure, the United Kingdom’s intervention was in fact necessary to achieve the development of Hinkley Point C.

By its second plea in law, the Republic of Austria contends that the General Court erred in law in three respects. First, it is said that it failed to recognise that the decision at issue does not identify, for the purposes of Article 107(3)(c) TFEU, the economic activity in question. In this respect, the Republic of Austria also claims that the General Court did not fulfil its obligations according to the second paragraph of Article 296 TFEU to adequately state its factual and legal reasons regarding the economic activity that is furthered by the aid for Hinkley Point C. Second, it says that the General Court misidentified the relevant economic activity, as the appropriate economic activity is the production of energy and not the production of nuclear energy. Third, it contends that the General Court failed to acknowledge that market failure is a legal prerequisite of any finding of necessity under Article 107(3)(c) TFEU.

(b) Assessment

So far as the question of failure of identification of the economic activity to be pursued by the aid is concerned, the General Court not only rejected the argument that there had been an inadequate statement of reasons, (63) but the entire decision at issue proceeds on the basis that what is at issue is the generation of electricity through the use of nuclear power and is replete with references of that kind. Many examples could be cited for this purpose, but it is probably sufficient to point to recital 358 of the decision at issue, which states ‘the Commission therefore concludes that the [Contract for Difference] for [Hinkley Point] establishes the conditions for the exercise of the activity of electricity generation through the use of nuclear technology …’.

In my view, therefore, the General Court did not commit any error of law when it stated in paragraph 139 of the judgment under appeal that it ‘must reject the Republic of Austria’s argument that the Commission failed to specify which economic activity within the meaning of Article 107(3)(c) TFEU was intended to be promoted by the measures at issue’. In that paragraph, the General Court relied on recital 392 of the decision at issue, which constitutes another example of where the economic activity was clearly identified. In so far as the Republic of Austria raises that argument with a view to having the Commission’s decision re-examined, that is obviously not admissible. (64)

Nor was the General Court’s own statement of reasons insufficient. It should first be pointed out that the applicant’s reliance on the second paragraph of Article 296 TFEU is erroneous. According to the established case-law, the obligation on the General Court, according to Article 53 in conjunction with Article 36 of the Statute of the Court of Justice, and Article 117(m) of the Rules of Procedure of the General Court, to state reasons does not require the General Court to provide an account which follows exhaustively and one by one all the arguments put forward by the parties to the case. The General Court’s reasoning may therefore be implicit on condition that it enables the persons concerned to know why the General Court has not upheld their arguments and provides the Court of Justice with sufficient material for it to exercise its power of review. (65)

In paragraphs 155 and 156 of the judgment under appeal, the General Court recalled the reasons that the Commission gave for its assessment and which show the specific nature of the production of nuclear power as an economic activity. The General Court thus clearly fulfilled the standard set out above.

By its second point, the Republic of Austria contends that the General Court should have determined that the relevant economic activity was the production of electricity and not the production of nuclear energy. That party argues that, for the purposes of the application of the State Aid rules, it is the ultimate product — that is, electricity — which counts.

I cannot accept this. The entire exercise involved in the application of the State aid rules is to define the relevant economic activity in order to assess whether the aid in question is necessary to assist economic development. One must therefore ask whether the State aid will assist with regard to the development of nuclear energy, as distinct from electricity production in general. There was abundant evidence before the Commission — as the General Court found (66) — that the market was either unwilling, or even incapable, of financing the Hinkley Point C project absent the guarantees and other forms of aid provided by the United Kingdom. It is irrelevant for present purposes that there might not be market failure in respect of other forms of electricity production. Here, yet again, the right of each Member State to choose its own energy mix under Article 194(2) TFEU must also be borne in mind.

In so far as the Republic of Austria relies on paragraph 54 et seq. of the General Court’s order in Greenpeace Energy and Others v Commission, (67) it must be pointed out that in that case the General Court dealt with the parties’ right to bring an action according to the fourth paragraph of Article 263 TFEU, which is to be considered pursuant to the criteria set out in Plaumann v Commission. (68) For that purpose, the General Court dealt with the question of whether there is a competitive market situation between the recipients of the aid and the claimants. That assessment aims at determining whether the claimants were affected by the aid. That, however, is a slightly different matter from determining what constitutes an ‘economic activity’ for the purposes of Article 107(3)(c) TFEU. The economic activity is determined in order to establish a reference point for a proportionality test, where the necessity of the aid for the facilitation of the economic activity is ascertained, and, if that aid is necessary, whether it has the incentive effect for that purpose. The competitive market situation, on the other hand, only becomes relevant when looking at the further criterion of Article 107(3)(c) TFEU of whether the aid adversely affects trading conditions to an extent contrary to the common interest. (69) For that purpose, the General Court indeed relied on the whole electricity market rather than on the mere ‘economic activity’, which is the generation of electricity through the use of nuclear power. (70)

For those reasons the General Court did not err in law when it considered the production of nuclear energy to be the relevant economic activity for the purposes of the positive criterion of Article 107(3)(c) TFEU, namely whether the aid facilitates the development of certain economic activities.

The third argument under this heading is that the General Court should have considered market failure to be a relevant criterion for the application of Article 107(3)(c) TFEU. Contrary to what the General Court found in its decision, the Republic of Austria argues that the Commission had identified a market failure, although, according to the former party, due to the wrong definition of the market, that finding was incorrect.

Once again, I find myself unable to accept that argument. For a start, the Commission found that there had been a market failure because it proceeded on the premiss that ordinarily functioning capital markets will not finance the construction of new nuclear power stations given the extremely long timelines involved and the perceived political risk associated with such a project. (71)

Next, it should be borne in mind that the General Court has, to date — correctly, in my view — rejected the suggestion that the identification of market failure is a vital element in the Article 107(3)(c) TFEU assessment. (72) I would not wish to be misunderstood on this point: the existence of market failure may, of course, often provide the most compelling evidence of the necessity for aid within the meaning of Article 107(3)(c) TFEU. What is, however, necessary for this analysis is not the existence of a market failure in and of itself, (73) but rather whether the State aid in question would facilitate certain economic activities. (74)

This plea refers to the proportionality test which is the negative condition contained in Article 107(3)(c) TFEU according to which an aid measure must not only be necessary to facilitate the development of an economic activity, it must do so without adversely affecting trading conditions to an extent contrary to the common interest.

So far as the proportionality argument with respect to the electricity market as a whole is concerned, this in truth appears to be a variant of the second part of the second plea in law, namely, that the relevant market is the wider electricity market as distinct from the nuclear energy production market. In this context, however, it is irrelevant that electricity could have been produced by other means.

This leads back to the fundamental point that, pursuant to Article 194(2) TFEU, the United Kingdom was entitled to choose its various sources of energy and that it opted to have nuclear energy as part of that energy mix. The Commission was therefore obliged, by reason of Article 194(2) TFEU, to have regard to the proportionality of the measure at issue designed to give effect to that policy choice, namely, the production of nuclear energy at Hinkley Point C. It cannot be said, therefore, that the Commission’s proportionality assessment was impermissibly narrow or that the General Court erred in law in that regard.

So far as the test case argument is concerned, the Republic of Austria relies on section 6 of the Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union. (75) I confess that I found this reference somewhat puzzling, because there is nothing in section 6 (or, for that matter, elsewhere) of the Commission Notice dealing with the notion of test cases. The Commission Notice only deals with the question of whether a measure constitutes State aid within the meaning of Article 107(1) TFEU. According to its second recital, ‘it does not concern the compatibility of State aid with the internal market pursuant to Article 107(2) and 3 and Article 106(2) of the Treaty, which is for the Commission to assess.’ As such the Commission Notice is entirely irrelevant so far as any assessment of the proportionality of a measure for the purposes of Article 107(3)(c) TFEU is concerned. Accordingly, it cannot be said that the Notice offers any real guidance as to the principles to be applied in respect of such an assessment.

I am equally unpersuaded by the Republic of Austria’s reliance on the decision of this Court in Eventech. (76) That case concerned the question of whether a regulatory decision permitting certain public transport vehicles involved in the carriage of passengers to use the bus lanes on London’s streets while excluding others could amount to a form of State aid. In the course of its judgment, the Court observed that for that purpose ‘it is necessary, not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition’. (77)

I cannot help feeling that rather too much is being made of that admittedly very important decision dealing with the potential impact of the State aid in question. Specifically, there is nothing at all in that judgment to suggest that the assessment whether a State aid is compatible with the internal market must be made other than by reference to the individual aid involved in the contested measure at hand. All of this means that there is nothing in Eventech (78) to support the wider contention that the Commission should have regard to the question of whether the granting of aid(s) of that kind might distort competition in general.

Nor can I accept the argument that the effect of that decision will be to favour nuclear power operators at the expense of other forms of electricity production. (79) It must be recalled that each notification for the grant or alteration of State aid must be judged on its own individual merits by reference to Article 107 TFEU.

In any event, it is perfectly obvious that the barriers to entry to the nuclear power market are quite different to those of other forms of electricity production: those specific barriers include the political risk associated with the opposition to nuclear power, the enormous capital costs involved in the construction of those plants and the particular costs associated with the secure storage of spent nuclear fuel. As I have already noted, the disputed aid measure in the present case seeks to address those particular difficulties by, for example, having special arrangements designed to deal with the particular and specific political risks associated with the project. Precisely because those provisions are aimed at addressing those particular risks, the suggestion that the decision at issue somehow involves a form of discrimination against other forms of electricity production is, with respect, both contrived and unrealistic.

Furthermore, the Republic of Austria contends that the General Court was wrong to hold that it did not need to take account of the extent to which the measures at issue were detrimental to key environmental principles, such as the precautionary principle, the ‘polluter pays’ principle and the sustainability principle. (80) Quite apart from the fact that the Republic of Austria did not go beyond the level of assertion as far as alleged environmental damage is concerned, one should also observe that Article 107 TFEU is located within Title VII, which prescribes common rules on competition, taxation and the approximation of laws. The task of the Commission, therefore, is, as Article 107(2) and (3) TFEU makes clear, simply to assess whether the State measure in question ‘may be considered to be compatible with the internal market’.

The internal market is itself defined by Article 26(2) TFEU as an area ‘without internal frontiers in which the free movement of goods, person, services and capital is ensured in accordance with the provision of the Treaties’. While it is true that, as the General Court observed in Castelnou Energía v Commission, (81) environmental policies must be integrated into definition and implementation of EU policies, the fact remains that, as that Court also observed in that case, ‘protection of the environment does not constitute, per se, one of the components of that internal market’.

It is thus clear that the task envisaged for the Commission by Article 107 TFEU is a more limited one than that urged by the Republic of Austria. That task is essentially to assess the compatibility of the aid in question with the rules on competition and the internal market. However, the Commission is not given the task of making an assessment in that context of whether the specific aid measure complies with EU law in general, above and beyond the specific requirements of the internal market and the competition rules.

This is perhaps especially true in the context of matters such as compliance with environmental rules, since that is a task which, in the first instance at least, is allocated to the relevant authorities in each of the Member States whose responsibility it is to decide on whether the project in question should receive the appropriate permission from a planning and environmental perspective. In this respect, I agree with the statement by the General Court when it stated in BUPA and Others v Commission, (82) that the Commission ‘is required to make an assessment by reference to the relevant provisions which are not, strictly speaking, covered by the law on aid only where certain aspects of the aid in issue are so closely linked to its object that any failure on their part to comply with those provisions would necessarily affect the compatibility of the aid with the common market’.

It follows, therefore, that the General Court did not err in its assessment that the Commission was not obliged to consider the potential environmental impact of Hinkley Point C in its consideration of whether the aid was compatible with the internal market for the purposes of Article 107(3)(c) TFEU.

(a) Summary of the Republic of Austria’s arguments

In paragraphs 612 and 613 of the judgment under appeal, the General Court stated that in a case in which the Community guidelines on State aid for environmental protection (83) were applicable, there was a requirement to classify the aid at issue with respect to whether it was investment aid or operating aid. It held that, however, that was not necessary in the circumstances.

The Republic of Austria challenges those findings and submits that parts of the aid measures constitute operating aid which is not designed to incentivise investment in the plant, but was rather a form of aid designed in essence to subsidise the operation of the plant. It further contends that operating aid is at best, in exceptional cases, compatible with the common market. The Republic of Austria points out that, on a functioning product market that provides the product ‘electricity’ in the necessary quantities, operating aid is inadmissible because it distorts competition to an extent contrary to the common interest.

The General Court nonetheless agreed with the Commission that the aid in question had to be regarded as equivalent to investment aid, since it allowed NNBG to commit to investment in the construction of Hinkley Point C. Specifically, it concluded that, from a financial modelling point of view, the net present value of the ‘strike price’ payments could be regarded as the equivalent of a lump sum payment which would allow NNBG to cover the construction costs.

(b) Assessment

The arguments of the Republic of Austria were rejected by the General Court, with that Court observing in paragraph 583 of the judgment under appeal:

‘… There is nothing to preclude an aid measure which pursues a public interest objective, which is appropriate to and necessary for the attainment of that goal, which does not adversely affect trading conditions to an extent contrary to the common interest and which therefore satisfies the requirements of Article 107(3)(c) TFEU from being declared compatible with the internal market under that provision, irrespective of whether it must be characterised as investment aid or operating aid. It should, moreover, be recalled that even operating aid may be declared compatible with the internal market if those conditions are satisfied (see, to that effect, judgment of 9 June 2016, Magic Mountain Kletterhallen and Others v Commission, T‑162/13, not published, EU:T:2016:341, paragraphs 116 and 117).’

Quite apart from the fact that that statement was not challenged by the Republic of Austria, which might render this plea ineffective, the fourth plea is also unfounded. The Commission had also found that the measures pursued a public interest objective, namely, the creation of new nuclear energy generation capacity, which could not be achieved within a reasonable time without State intervention. In those circumstances, the General Court found that those measures ‘cannot be regarded as aid that is limited to maintaining the status quo’ and that, on the contrary, ‘according to the Commission’s findings, without them, no investment in new nuclear energy generating capacity would be made within a reasonable time’. (84) The General Court also held — correctly, in my view — that the Contracts for Difference were, in essence, a price stabilisation mechanism designed ‘to guarantee stable revenues for a sufficiently long period of time to encourage the undertaking concerned to invest the funds necessary to build that new capacity’. It was not, moreover, comparable to the traditional form of aid, which operated as a non-repayable subsidy. On the contrary, it rather sought to incentivise investment by guaranteeing a reliable and stable price. (85)

One might add that the Contract for Difference procedure is inherently proportionate inasmuch as it provides for what might be termed a ‘clawback’ mechanism, in that it allows for the ‘clawback’ of funds should the reference price exceed the strike price. All of this reinforces the point that the Contract for Difference is to be designed to ensure a stable revenue price for investors. That price is pitched at a level which ensures greater confidence for investors that they can achieve a target return on their investment over time. While the strike price is designed to allow for a fair margin in favour of those investors, the clawback mechanism also ensures that investors do not receive any windfall bonus in the event that the reference price exceeds the strike price.

The General Court also held — again, in my view, correctly — that the Commission was, in the circumstances, entitled to have regard to the fact that the strike price took into account not only the construction costs in relation to Hinkley Point C, but also the operating costs. The General Court took the view — once again, I think, correctly — that those costs influenced ‘the profitability of the project and therefore [had] an impact on the amount which the strike price must attain in order to trigger the decision to invest in new nuclear energy generating capacity’. (86)

As I have just indicated, for my part, I can only agree with that analysis. At the risk of repetition: the key point in respect of the compatibility of any aid with the internal market for the purposes of Article 107(3)(c) TFEU is, fundamentally, whether such aid leads to the development of certain economic activities which would not otherwise take place. There cannot, I think, be any ex ante distinction between investment aid, on the one hand, and operating aid, on the other. Not only is such a distinction not warranted by a consideration of the actual text of Article 107 TFEU itself, but, in any event, such a distinction would be simplistic and would merely lend itself to circumvention by the use of contrived accounting techniques.

One may naturally agree that the fact that a contested measure amounts to operating aid may, in some circumstances, be indicative of the fact that the aid is simply designed to reinforce the status quo. As the General Court itself remarked, aid of that kind cannot, of course, ‘meet the requirements of Article 107(3)(c) TFEU’, because such aid does not ‘facilitate development within the meaning of that provision’. (87)

Yet the situation in the present case is entirely different and — it might be even more accurate to say — is, in some respects, exceptional. It is true that, as the Republic of Austria has observed, some elements of the strike price are not confined to pure construction costs per se, but also include specific costs associated with nuclear energy production, including the cost of managing spent fuel. Those costs are nonetheless investment costs, which NNBG must necessarily incur if the plant is to be operational.