Action brought on 25 August 2008 - Pannon Hőerőmű v Commission of the European Communities

(Case T-352/08)

Language of the case: Hungarian

Parties

Applicant(s): Pannon Hőerőmű Energiatermelő (Pécs, Hungary) (represented by: M. Kohlrusz, P. Simon and G. Ormai)

Defendant(s): Commission of the European Communities

Form of order sought

As a main claim, annulment of the decision of the Commission of 4 June 2008 on aid granted by Hungary under long term power purchase agreements (C 41/2005 (ex NN49/2005), 'the contested decision').

In the alternative, that the applicant be exempted from the obligation to repay the aid imposed by the contested decision.

That the Commission be ordered to pay the costs.

Pleas in law and main arguments

The applicant is a private limited company principally involved in the production of electricity. Before the accession of Hungary to the European Union, certain electricity producers, as sellers, concluded long term power purchase agreements ('PPAs') with MVM Trade Villamosenergia-kereskedelmi Zrt. ('MVM'), as purchaser. Under those agreements, MVM is obliged to purchase a specific quantity of electricity from the producers operating under the PPAs. According to the contested decision, that obligation to purchase constitutes state aid incompatible with the common market, which must be repaid by its recipients.

In support of its main claim, seeking the annulment of the contested decision, the applicant essentially alleges that there has been a breach of essential procedural requirements, that the legal rules have been misapplied and that it has an obligation to supply in the general economic interest.

As regards the breaches of essential procedural requirements, the applicant complains, first, that the Commission did not examine each of the PPAs but reached a general conclusion concerning all the PPAs. Second, the applicant alleges that the Commission did not take into account the applicability of the PPAs in the long term but only from 1 May 2004, that is to say, it considered the period between the accession of Hungary to the European Union and the adoption of the contested decision. Third, the applicant states that the Commission only examined how an economic operator in the position of MVM proceeded and did not analyse the conduct of economic operators in the position of the electricity producers. Fourth, it alleges that the Commission erroneously classed the price fixing mechanism adopted under the PPAs as a 'guarantee'. Fifth, and finally, it submits that, as regards distortion of competition, the Commission merely made general statements and did not examine the actual circumstances.

In the event that the plea in law alleging breach of essential procedural requirements is held to be unfounded, the applicant puts forward a plea based on the misapplication of the law. According to the applicant, the conditions are not met for the classification of the PPAs it concluded as State aid. First, the Commission is wrong to apply the criterion of private investor, since the situation of MVM cannot be compared to that of a typical private investor. Second, the measure cannot be said to be of a selective nature either, since the conclusion of the PPAs was an express legal obligation. Third, the advantage was not granted by the State as MVM is a commercial company operating under market conditions. Fourth, there was no distortion of competition since there is no evidence that the PPAs have had any effect on competition.

However, in the event that the Court of First Instance should consider that the conditions for State aid are met, the applicant states that the service it supplied is in the nature of a service of general economic interest so that the PPAs which it concluded do not constitute State aid incompatible with the common market.

In support of its claim that it should be exempted from the obligation to repay, submitted in the alternative in its application, the applicant relies on the principles of proportionality, of the protection of legitimate expectations and legal certainty and the right to legal redress.

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