Case T-156/04

Électricité de France (EDF)

v

European Commission

(State aid – Aid granted by the French Authorities to EDF – Decision declaring the aid incompatible with the common market and ordering its recovery – Procedural rights of the recipient of the aid – Effect on trade between Member States – Private investor test)

Summary of the Judgment

1.      State aid – Examination by the Commission – Administrative procedure – Obligation on the Commission to put the parties concerned on notice to submit their observations – Right of the aid beneficiary to be sufficiently associated with the proceedings

(Art. 88(2) EC; Council Regulation No 659/1999, Art. 6)

2.      State aid – Commission decision – Assessment of the legality by reference to the information available at the time of adoption of the decision

(Art. 87 EC)

3.      State aid – Effect on trade between Member States – Adverse effect on competition – Criteria for assessment

(Art. 87(1) EC)

4.      State aid – Concept – Application to public investors of the prudent private investor test

(Art. 87(1) EC)

5.      State aid – Concept – Granting Member State having the capacity both of tax creditor and sole shareholder of a public undertaking benefiting from an increase of capital through waiver of a tax debt – Applicability of the private investor test

(Art. 87(1) EC)

1.      During the investigation phase under Article 88(2) EC, the Commission has a duty to put the interested parties on formal notice to put forward their comments. If those interested parties do not enjoy the rights to a fair hearing, they nevertheless have the right to be involved in the administrative procedure conducted by the Commission to the extent appropriate in the light of the circumstances of the case. Furthermore, the Commission must initiate a formal investigation procedure, informing the interested parties, when, following a preliminary investigation, it has serious doubts as to the compatibility of the financial measure in question with the common market. It follows that, in its notice of intention to initiate that procedure, the Commission cannot be required to present a complete analysis on the aid in question, but it is sufficient for it to define sufficiently the framework of its investigation so as not to render meaningless the right of interested parties to put forward their comments. Furthermore, according to Article 6(1) of Regulation No 659/1999, laying down detailed rules for the application of Article [88 EC], where the Commission decides to initiate the formal investigation procedure, it is permissible for its decision merely to summarise the relevant issues of fact and law, include a preliminary assessment as to the aid character of the State measure in question and set out its doubts as to the measure’s compatibility with the common market.

The decision to initiate the procedure must give interested parties the opportunity effectively to participate in the formal investigation procedure, during which they will have the opportunity to put forward their arguments. For that purpose, it is sufficient for the parties concerned to be aware of the reasoning which has led the Commission to conclude provisionally that the measure in issue might constitute new aid incompatible with the common market.

(see paras 106-110)

2.      In an action for annulment, the legality of a Community measure must be assessed on the basis of the information existing at the time when the measure was adopted. In particular, the complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when the assessments were made. In this respect, it cannot be complained that the Commission failed to take into account information which could have been submitted to it during the administrative procedure but which was not, since it is under no obligation to consider, of its own motion and on the basis of prediction, what information might have been submitted to it.

(see paras 125-126)

3.      For the purposes of categorising a national measure as State aid, 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. The Commission is not required to carry out an economic analysis of the actual situation on the relevant market, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings and of the trade flows in question between Member States.

When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. In that regard, the fact that an economic sector has been liberalised at Community level may serve to determine that the aid has a real or potential effect on competition and affects trade between Member States.

In addition, it is not necessary that the beneficiary undertaking itself be involved in intra-Community trade. Aid granted by a Member State to an undertaking may help to maintain or increase domestic activity, with the result that undertakings established in other Member States have less chance of penetrating the market of the Member State concerned. Furthermore, the strengthening of an undertaking which, until then, was not involved in intra-Community trade may place that undertaking in a position which enables it to penetrate the market of another Member State.

(see paras 144-148)

4.      In the case of an undertaking whose share capital is owned by the public authoritiesit must be considered whether, in similar circumstances, a private investor of a stature comparable to that of the bodies administering the public sector would have provided contributions of capital of the same size, having regard to the foreseeability of obtaining a return and leaving aside all social, regional-policy and sectoral considerations.

The fact that the actions of the State as shareholder are assessed by the yardstick of a prudent private investor, whereas the actions of any normal private investor are not, does not constitute a failure to treat the State and such a private investor equally, since the State as shareholder is not in the same situation as a private investor. Unlike a private investor, who can count only on his own resources in order to finance his investments, the State has access to financial resources flowing from the exercise of public power, in particular from taxation. Consequently, the mere fact that the State has access to financial resources accrued through the exercise of State authority is not in itself sufficient justification for regarding the State’s actions as attributable to the exercise of State authority. If it were, application of the prudent private investor test to the conduct of a State which is a shareholder could well be futile or, at least, of disproportionately limited value, since, as a State, it inevitably has recourse to financial resources accrued through the exercise of public power, in particular from taxation.

(see paras 230-232)

5.      In the field of State aid, a distinction must be drawn between two categories of situation: those where the intervention of the State is of an economic nature and those where it forms part of the exercise of public powers. If the State’s intervention, having regard to its nature and object and taking into account the objective pursued, is not an investment which may be made by a private investor, that intervention may constitute intervention by the State as a public authority, thus precluding application of the prudent private investor test. By contrast, if the State’s intervention, having regard to its nature and object and taking into account the objective pursued, is an investment comparable to that which a private investor would make, that intervention must be examined by applying the prudent private investor test. The purpose of that examination is to ascertain whether such an investor would, in similar circumstances and having regard to the foreseeability of obtaining a return, have provided contributions of capital of the same size, irrespective of the form taken by that State intervention and of the fact that the State has access to resources flowing from the exercise of public power, such as those from taxation, which could not be accessed by a private investor.

In other words, the measure must be examined not solely according to its form, but on the basis of its nature, its object and its objectives, which presupposes that all aspects of it are examined and that its context is taken into consideration. Furthermore, it follows that the fact that the intervention by the State takes the form of legislation is not, in itself, sufficient to rule out the possibility that the intervention by the State in the capital of an undertaking pursues an economic objective which could also be pursued by a private investor.

It is thus necessary to establish, taking into account the circumstances of each individual case, whether the public participation or intervention in the capital of the beneficiary undertaking has an economic objective that might also be pursued by a private investor and is thus undertaken by the State in its role as an economic operator in the same way as a private operator, or whether, on the other hand, it is justified by the pursuit of a public interest objective and must be regarded as action taken by the State in the exercise of its authority as a State, in which case, the actions of a State are not comparable with those of an economic operator or a private investor in a market economy.

It is therefore necessary to examine whether a Member State which is both the tax creditor of a public undertaking and its sole shareholder can reasonably rely on the application of the private investor test where it increases the capital of that undertaking by waiving that tax claim, or whether it is necessary to consider that, in the light of the fiscal nature of the claim and the fact that the State used its prerogatives as a public authority when waiving that claim, the Commission was entitled not to apply that test in connection with the capital increase at issue.

Thus, where a Member State, being the sole shareholder of an undertaking, injects capital into that undertaking with a view, inter alia, to correcting the imbalances affecting that undertaking’s balance sheet, the inevitable conclusion is that it is acting as a private investor could act and that it cannot be ruled out a priori that it may be acting with an aim comparable to that of such an investor. It is with a view to establishing whether that was indeed the case, which would mean that the classification of the contested measure as aid could be ruled out, that it is necessary to determine whether or not the private investor test is satisfied.

(see paras 223, 233-237, 246, 258)