EU State Aid - AG advises CJEU to reverse 'Tempus' judgment

ln an opinion issued today, the Advocate General (Tanchev) has advised that the judgment of the General Court in 'Tempus' (which limits the EU Commission's discretion to close State Aid cases without opening an 'in-depth' investigation) should be reversed

Background

In July 2014, the European Commission decided not to raise objections following the notification of the UK's scheme to provide support to the GB electricity sector through a capacity market mechanism (which had itself been preceded by extensive pre-notification engagement), resulting in clearance of the scheme for State Aid purposes.

The decision to clear the scheme was challenged before the General Court by Tempus Energy, a firm engaged in the emerging 'demand side response' (DSR) technology, which claimed that the Commission ought to have opened an 'in depth' investigation into the notified scheme rather than simply clearing it without raising objections.

In 2018 the General Court annulled the Commission's decision on the basis that, in view of the doubts which legitimately existed as to the compatibility of the scheme with the State Aid rules at the time, it ought to have opened an 'in depth' investigation.

The Commission appealed against the General Court's judgment and, in the interim, opened an 'in depth' investigation, following which (in October 2019) it decided to clear the scheme as being compatible with the State Aid rules.

The core holding of the General Court judgment

According to the General Court, the Commission was wrong to adopt its clearance decision on completion of a mere preliminary examination and should have instead initiated the formal investigation procedure provided for in Article 108(2) TFEU. In the view of the General Court, a body of objective and consistent indications consisting in, first, the length and the characteristics of the pre-notification phase, and, second, the lack of appropriate investigation by the Commission with regard to certain aspects of the capacity market, demonstrated that the serious difficulties that arose from the assessment of the compatibility of the scheme with the internal market had not been overcome during the preliminary examination. As a consequence, according to the General Court, there remained doubts as to the compatibility of the scheme which required the opening of the formal procedure.

The AG's opinion - no duty to investigate third party claims

In today's opinion, the AG recommends that the judgment of the General Court be reversed on the basis that it erred in its various criticisms of the approach of the Commission.

In perhaps the most important section of the opinion, the AG considers the extent to which the Commission is legally required to investigate third party allegations concerning a notified scheme before it is entitled to conclude that there are no serious difficulties presented by the case.

The General Court’s approach amounts to imposing on the Commission an obligation to investigate, of its own motion, unsubstantiated matters

The AG acknowledged that the Commission’s final decision must, to the extent possible, be based on complete and reliable information and that it may rely solely on the information provided by the notifying Member State concerned only where that information is complete and reliable. Thus, where, in the context of a preliminary examination, a third party adduces evidence that calls into question the completeness and reliability of the information provided by the Member State concerned, the Commission should not be permitted to ignore that evidence.

However, in the AG's view, in the context of a preliminary investigation, the Commission may generally confine itself to relying on the information provided by the Member State concerned, unless a third party adduces evidence that, in the Commission’s view, calls into question that information.  However, in the latter case, the Commission is simply obliged to take that evidence into account, not to go beyond the examination of the facts and points of law brought to its attention by the third party.