Case T‑469/20

Kingdom of the Netherlands

v

European Commission

Judgment of the General Court (Seventh Chamber, Extended Composition), 16 November 2022

(State aid – Netherlands law prohibiting the use of coal for the production of electricity – Early closure of a coal-fired power plant – Award of compensation – Decision not to raise any objections – Decision declaring the compensation compatible with the internal market – No express classification as ‘State aid’ – Action for annulment – Challengeable act – Admissibility – Article 4(3) of Regulation (EU) 2015/1589 – Legal certainty)

1. Action for annulment – Actionable measures – Concept – Measures producing binding legal effects – Decision finding a State measure compatible with the internal market without prior classification of that measure as State aid – Included

   (Art. 263 TFEU)

   (see paragraphs 27-34)

2. State aid – Examination by the Commission – Powers – Adoption of a decision finding a State measure compatible with the internal market without prior classification of that measure as State aid – Decision exceeding the Commission’s powers

   (Art. 107(3) TFEU; Council Regulation 2015/1589, Art. 4(3))

   (see paragraphs 51-53, 55, 58-62, 64, 70, 71)

Résumé

The General Court annuls the decision of the European Commission validating the compensation for the closure of coal-fired power plants operating in the Netherlands. The Commission could not rule on the compatibility of a national measure with the internal market without first establishing that that measure constituted State aid.

On 11 December 2019, the Kingdom of the Netherlands adopted a law prohibiting the use of coal for the production of electricity from 1 January 2030 at the latest.

After that law came into force, four of the five coal-fired power plants operating in the Netherlands benefited from a transitional period of 5 to 10 years enabling them to recoup the investments made, adapt to another raw material or prepare for closure. However, the Hemweg 8 power plant, which did not burn biomass, produced no renewable energy, and whose efficiency was lower than that of the other four coal-fired power plants, was forced to close at the end of 2019.

In that context, the Netherlands Government decided to grant compensation of EUR 52.5 million to the company operating the Hemweg 8 power plant for the damage incurred due to early closure (‘the measure at issue’), in accordance with the provision of the law of 11 December 2019 to that effect.

By decision of 12 May 2020, ( 1 ) the European Commission declared the measure at issue compatible with the internal market, pursuant to Article 107(3)(c) TFEU, without, however, examining whether that measure conferred an advantage on the company operating the Hemweg 8 power plant and therefore constituted State aid.

The Kingdom of the Netherlands brought an action for the annulment of that decision, which is upheld by the Seventh Chamber (Extended Composition) of the General Court. In that context, the Court states that the Commission cannot rule on the compatibility of a national measure with the internal market without first establishing whether that measure constitutes State aid within the meaning of Article 107(1) TFEU.

Findings of the Court

As a preliminary point, the Court dismisses the objection of inadmissibility raised by the Commission, alleging that no binding legal effect followed from the contested decision for the Kingdom of the Netherlands.

Indeed, according to settled case-law, a decision based on Article 107(1) and (3) TFEU, which, while classifying a measure as State aid, declares it compatible with the internal market, must be regarded as a challengeable act under Article 263 TFEU.

Yet, even if the contested decision did not rule on the question whether the national measure at issue constituted State aid, it had the effect of authorising it. Thus, by adopting that decision, the Commission decided to bring to an end the preliminary examination procedure which it initiated, and implicitly refused to open the formal examination procedure under Article 108(2) TFEU. It therefore adopted a definitive position on the compatibility of the measure at issue with the internal market which has binding legal effects.

The Court accordingly declares the action admissible, without it being necessary to examine whether the binding legal effects produced by the contested decision were capable of affecting the interests of the Kingdom of the Netherlands.

The Court then examines the claims of the Kingdom of the Netherlands alleging that, by declaring the measure at issue compatible with the internal market without ruling on its classification as State aid, the Commission exceeded its powers and infringed the principle of legal certainty.

In that regard, the Court recalls, first of all, that the Commission adopted the contested decision on the basis of Article 4(3) of Regulation 2015/1589, ( 2 )by finding, in its operative part, that the measure at issue was compatible with the internal market in terms of Article 107(3)(c) TFEU.

According to the latter provision, ‘aid’ intended to facilitate the development of certain economic activities or of certain economic areas may be considered compatible with the internal market where such aid does not adversely affect trading conditions to an extent contrary to the common interest. The use of the term ‘aid’ implies that the compatibility of a national measure with the internal market can only be examined after that measure has been classified as aid.

In addition, it is settled case-law that, if the Commission is unable to conclude, following the preliminary examination procedure, that a State measure either is not ‘aid’ within the meaning of Article 107(1) TFEU or, if classified as aid, is compatible with the Treaty, or where that procedure does not enable the Commission to overcome all the difficulties involved in determining whether the aid is compatible with the internal market, the Commission is under a duty to initiate the procedure under Article 108(2) TFEU, without having any discretion in that regard.

It follows that, according to the Court, the Commission may only consider a measure to be compatible with the internal market if that measure comes within the scope of Article 107(1) TFEU, in other words, if that measure constitutes State aid.

That conclusion is further supported by the relevant provisions of Regulation 2015/1589, Article 4 of which provides for a stage at which the aid measures undergo a preliminary examination, intended to enable the Commission to form an initial view of the measure under examination. On completion of that stage, the Commission is to make a finding either that the State measure at issue does not constitute aid within the meaning of Article 107(1) TFEU or that it falls within the scope of that provision. In the latter case, it may be that that measure does not raise doubts as to its compatibility with the internal market; on the other hand, it is also possible that the measure may raise such doubts. If, following the preliminary examination, the Commission finds that, notwithstanding the fact that the measure notified falls within the scope of Article 107(1) TFEU, it does not raise any doubts as to its compatibility with the internal market, the Commission is to adopt a decision not to raise objections under Article 4(3) of Regulation 2015/1589.

Accordingly, Article 4 of Regulation 2015/1589 sets out an exhaustive list of the decisions that the Commission may adopt after the preliminary examination of the national measure at issue, which does not include the possibility of adopting a decision declaring a national measure compatible with the internal market without the Commission having first ruled on the classification of that measure as State aid.

Consequently, the Court holds that the Commission exceeded its powers by declaring in the contested decision that the measure at issue was compatible with the internal market, without first ruling on the question whether such a measure constituted aid. Furthermore, to the extent that the contested decision did not enable the Kingdom of the Netherlands to know precisely its rights and obligations, the Commission also infringed the principle of legal certainty.

On those grounds, the Court upholds the action and annuls the contested decision, without ruling on the other pleas raised by the Kingdom of the Netherlands.

( 1 ) Commission Decision C(2020) 2998 final of 12 May 2020 on State aid SA. 54537 (2020/NN) – Netherlands, Prohibition of coal for the production of electricity in the Netherlands (‘the contested decision’).

( 2 ) Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU (OJ 2015 L 248, p. 9). According to the provision cited, ‘where the Commission, after a preliminary examination, finds that no doubts are raised as to the compatibility with the internal market of a notified measure, in so far as it falls within the scope of Article 107(1) TFEU, it shall decide that the measure is compatible with the internal market … The decision shall specify which exception under the TFEU has been applied’.