Case C‑40/23 P

European Commission

v

Kingdom of the Netherlands

Judgment of the Court (Second Chamber) of 13 June 2024

(Appeal – State aid – Law prohibiting the use of coal for the production of electricity – Early closure of a coal-powered power plant – Award of compensation – Decision declaring the measure compatible with the internal market without stating whether State aid exists – Exercise of the European Commission’s powers)

Aid granted by a Member State – 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

(Arts 107 and 108 TFEU)

(see paragraphs 37-49)

Résumé

Dismissing the appeal brought by the European Commission against the judgment of the General Court of 16 November 2022 ( 1 ) in a case between it and the Kingdom of the Netherlands, the Court of Justice clarifies the conditions for the exercise of the Commission’s power to examine the compatibility of a national measure with the internal market in the light of Articles 107 and 108 TFEU. In its judgment, the General Court had considered that the Commission could not decide on the compatibility of a national measure with the internal market without first establishing whether that measure constituted State aid within the meaning of Article 107(1) TFEU.

In 2019, the Netherlands authorities notified the Commission of a draft law prohibiting the use of coal for the production of electricity, in accordance with Directive 2015/1535. ( 2 ) That law sought to reduce carbon dioxide (CO2) emissions in the Netherlands and provided for compensation for the damage caused to a coal-fired power plant disproportionately affected, as compared with other power plants, by the prohibition on using coal for the production of electricity. However, it was not notified to the Commission under Article 108(3) TFEU.

Following the notification of the draft law under Directive 2015/1535, the Commission, acting on its own initiative, began to examine the information concerning alleged aid and concluded, by decision of 12 May 2020, ( 3 ) that the measure at issue was compatible with the internal market, in accordance with Article 107(3)(c) TFEU, ( 4 ) without, however, having found that that measure conferred an advantage on the beneficiary and therefore constituted State aid.

The Kingdom of the Netherlands then brought an action for annulment of that decision before the General Court, alleging that the Commission had exceeded its powers and created legal uncertainty. Following the annulment of that decision by the General Court, the Commission brought an appeal against the judgment of the General Court before the Court of Justice.

Findings of the Court

In support of its appeal, the Commission maintained in particular that, by finding that it had no power to decide that a measure is compatible with the internal market without first having classified it as State aid, the interpretation of the General Court of Article 107(3) TFEU was too restrictive. According to the Commission, the term ‘aid’ in that article also covers measures whose classification as State aid remains uncertain.

In that regard, the Court of Justice observes that although the term ‘aid’ is used according to the usual meaning in everyday language in Article 107(1) TFEU, it refers, by contrast, only to State aid in Article 107(3). It follows from Article 107(1) TFEU that only measures which fulfil the conditions arising from paragraph 1 and which, consequently, constitute State aid are, save as otherwise provided in the Treaty, incompatible with the internal market. Therefore, Article 107(3) TFEU, which, by way of exception to that provision, lists the measures which may be considered to be compatible with the internal market, can concern only State aid.

Although it is true that Article 107 TFEU neither lays down procedural rules nor directly concerns the Commission’s powers, the fact remains that it is apparent from that provision that the classification of a measure as State aid within the meaning of paragraph 1 of that provision is a precondition for the possible application of the exception laid down in paragraph 3. The European Union thus has the power to decide on the compatibility with the internal market of measures constituting State aid, and has no power to decide on the compatibility with the internal market of measures which have not been established as being State aid. Articles 108 TFEU confers on the Commission, subject to review by the Court of Justice, the exercise of that power. The EU institutions may only act within the limits of the powers conferred on them.

In the light of the foregoing, the Court of Justice considers that the General Court was fully entitled to annul the decision at issue.

( 1 ) Judgment of 16 November 2022, Netherlands v Commission (T‑469/20, EU:T:2022:713).

( 2 ) Directive of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services (OJ 2015 L 241, p. 1).

( 3 ) 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 decision at issue’).

( 4 ) Under Article 107(3)(c) TFEU, ‘the following may be considered to be compatible with the internal market: ... (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest’.