Again, on the 'tricky' concept of State resources under EU State aid law: GC rules on German financial support for renewable energy (T-47/15)

In its Judgment of 10 May 2016 in Germany v Commission, T-47/15, EU:T:2016:281, the General Court (GC) has revisited once more the tricky issue whether publicly-mandated payments between private economic operators can constitute State aid. The GC has followed the functional approach of the Court of Justice (ECJ) in Vent De Colère and Others (C-262/12, EU:C:2013:851, see here), continuing a line of case law that distinguishes PreussenElektra (C-379/98, EU:C:2001:160, see here), and further minimising the 'outlier' decision in Doux Élevages and Coopérative agricole UKL-AREE (C-677/11, EU:C:2013:348, see here).

In the case at hand, the relevant German scheme of financial support for the production of renewable energy created both mandatory purchase obligations of energy from renewable sources ('EEG energy') at above-market prices (the 'support scheme'), and reductions in such surcharges for certain types of electric-intensive undertakings in the manufacturing sector (or 'EUIs') (the 'compensation scheme'). Thus, the EEG energy financial scheme included both measures in support of producers and of 'heavy-users' of electricity. Importantly, all these financial measures were managed by intermediaries in the energy markets. The Commission had found this scheme in breach of EU State aid rules, unless stringent conditions applied.

One of Germany's main submissions against the application of State aid rules by the Commission (mainly, Art 107 TFEU) to prohibit was that the EEG energy support and compensation schemes was that 'according to the case-law, payments between individuals which are ordered by the State without being imputable to the budget of the State or of another public body and in respect of which the State does not relinquish any resources, in whatever form (such as taxes, duties, charges and so on), retain their private-law nature' (para 73).

This submission triggers an analysis of whether such payments qualify as State resources, which mainly hinges on whether the State has control over those funds. Seeking to rely on PreussenElektra and Doux Élevages, the arguments submitted by Germany focused on the fact that the aid was administered 'at arms length' by the energy intermediaries. On the contrary, seeking to rely on a functional approach to the assessment of 'public control' of the private funds that derived from the EEG energy financial scheme, the Commission's arguments were closer to the position of the ECJ in Vent De Colère.

In order to assess these issues, the GC reiterated consolidated case law of the ECJ and stressed that 'Article 107(1) TFEU covers all the financial means by which the public authorities may actually support undertakings, irrespective of whether or not those means are permanent assets of the public sector. Therefore, even if the sums corresponding to the measure in question are not permanently held by the Treasury, the fact that they constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as State resources' (para 83).

In the assessment of the EEG energy support and compensation schemes, the GC engaged in a reasoning that, fundamentally, relied on two main issues: 1) the fact that German law imposed on specific energy intermediaries (in the case, on transmission system operators, or TSOs) obligations oriented towards the administration of the EEG energy financial schemes that 'can be assimilated, from the point of view of their effects, to a State concession' (para 93); and 2) the fact that the funds raised through the EEG energy financial schemes are ring-fenced by law or, in other words, 'the funds are not paid into the TSOs’ general budget or freely available to them, but are subject to separate accounting and allocated exclusively to the financing of the support and compensation schemes, to the exclusion of any other purpose' (ibid).

As a result of these two circumstances, the GC concludes that 'the funds generated by the EEG surcharge and administered collectively by the TSOs remain under the dominant influence of the public authorities in that the legislative and regulatory provisions governing them enable the TSOs, taken together, to be assimilated to an entity executing a State concession' (para 94, emphasis added). Or, even more clearly, that 'the fact that the State does not have actual access to the resources generated by the EEG surcharge, in the sense that they indeed do not pass through the State budget, does not affect ... the State’s dominant influence over the use of those resources and its ability to decide in advance, through the adoption of the EEG 2012, which objectives are to be pursued and how those resources in their entirety are to be used' (para 118).

The second key element in the analysis, in my view, is that the GC gives significant relevance to the fact that the payments ultimately required from consumers derived necessarily from the existence of the German law enacting the . In other words, the GC relied heavily on the fact that the surcharges amounted to '20% to 25% of the total amount of an average final consumer’s bill. Having regard to the extent of that burden, its passing on to final consumers must therefore be regarded as a consequence foreseen and organised by the German legislature. It is thus indeed on account of the EEG 2012 that final electricity consumers are, de facto, required to pay that price supplement or additional charge. It is a charge that is unilaterally imposed by the State in the context of its policy to support producers of EEG electricity and can be assimilated, from the point of view of its effects, to a levy on electricity consumption in Germany. Indeed, that charge is imposed by a public authority, for purposes in the general interest, namely protection of the climate and the environment by ensuring the sustainable development of energy supply and developing technologies for producing EEG electricity, and in accordance with the objective criterion of the quantity of electricity delivered by suppliers to their final customers' (para 95, emphasis added).

In my view, the GC is right on both points, and both the functional analysis of the control the State exercises over ring-fenced mandatory charges and the stress given to the (para)fiscal nature of the charge are good justifications for the enforcement of State aid rules against this type of State intervention--thus closing the gap created by cases such as Doux Élevages

However, the case also leaves a strange aftertaste due to the references to a 'State concession'. Given the increasing body of EU economic law applicable to concessions (notably, Dir 2014/23, which does not seem to have much to do with what the GC assessed in Commission v Germany), it would probably have been preferable for the GC to keep a stricter use of language.

In that regard, if the GC actually wanted to stress that the intermediaries administering the EEG energy financial scheme were exercising (quasi) delegated public powers or (quasi) delegated State prerogatives (which was the language used in Doux Élevages, para 32), then it better ought to say so in those terms. Otherwise, there is a risk of generating additional confusion in an area of EU economic law that, honestly, is getting ever more complex.

CJEU follows AG Jääskinen in revisiting PreussenElektra and minimising Doux Elevages' requirements for State imputability of aid measures (C-262/12)

In its Judgment of 19 December 2013 in case C-262/12 Vent De Colère and Others, the Court of Justice of the EU has largely followed AG Jääskinen's Opinion (commented here) and confirmed that, under Article 107(1) TFEU, a mechanism for offsetting in full the additional costs imposed on undertakings because of an obligation to purchase wind-generated electricity at a price higher than the market price that is financed by all final consumers of electricity in the national territory constitutes an intervention through State resources and, consequently, is under the general prohibition of State aid.
This Judgment must be welcomed, particularly because the CJEU follows the submission made by the AG, who considered that consumer contributions amounted to the existence of 'State resources', due to 'the fact that these resources constantly remain under public control and, therefore, are available to the competent national authorities, [which] suffices to qualify them as State funds to finance the measure, which then falls within the scope of Article 107(1) TFEU' (para 34 of his Opinion, own translation from Spanish).
Indeed, the CJEU has reviewed the characteristics of the body administering the funds paid by consumers (a public body under effective State supervision) and has stressed that
33 […] the sums thus managed by the Caisse des dépôts et consignations must be regarded as remaining under public control.
34 All those factors taken together serve to distinguish the present case from that which gave rise to the judgment in PreussenElektra, in which the Court held that an obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable sources at fixed minimum prices could not be regarded as an intervention through State resources where it does not lead to any direct or indirect transfer of State resources to the undertakings producing that type of electricity (see, to that effect, PreussenElektra, paragraph 59).
35 As the Court has already had occasion to point out – in paragraph 74 of the judgment in Essent Netwerk Noord and Others – in the case which gave rise to the judgment in PreussenElektra, the private undertakings had not been appointed by the Member State concerned to manage a State resource, but were bound by an obligation to purchase by means of their own financial resources.
36 Consequently, the funds at issue [in PreussenElektra] could not be considered a State resource since they were not at any time under public control and there was no mechanism, such as the one at issue in the main proceedings in the present case, established and regulated by the Member State, for offsetting the additional costs arising from that obligation to purchase and through which the State offered those private operators the certain prospect that the additional costs would be covered in full.
37 Accordingly, Article 107(1) TFEU must be interpreted as meaning that a mechanism for offsetting in full the additional costs imposed on undertakings because of an obligation to purchase wind-generated electricity at a price higher than the market price that is financed by all final consumers of electricity in the national territory, such as that resulting from Law No 2000-108, constitutes an intervention through State resources (C-262/12 at paras 33 to 37, emphasis added).
In my view, the Vent De Colère Judgment advances in the functional approach to State aid and consolidates a general criterion of State control that should reduce the uncertainty surrounding the imputability to the State of (indirect) support measures through consumer contributions. The distinction with PreussenElektra is also rather clear now.
The only hurdle that remains in the way of such truly functional approach is the issue of imputability as addressed in Doux Élevages particularly in relation with (pseudo)fiscal measures (something that AG Jääskinen had addressed in  paras 50-54 of his Opinion but the CJEU felt no need to discuss in Vent De Colère). Hopefully, the CJEU will also minimise Vent De Colère on that point some time soon.

AG Jääskinen revisits PreussenElektra and minimises implications of Doux Elevages (C-262/12)

As a continuation of the Judgment of the Court of Justice of the EU of 30 May 2013 in case C-677/11 Doux Élevages and Coopérative agricole UKL-AREE, where the CJEU (re)analysed the concept of 'State aid' and stressed that aid cannot exist if the economic advantage under analysis is not funded by 'State resources' and there is no 'imputability to the State' (commented here); in his Opinion of 11 July 2013 in case C-262/12 Vent De Colère and Others, Advocate General Jääskinen has assessed a French scheme of support to electric distribution companies and revisited the well-known PreussenElektra criteria.

In his analysis, AG Jääskinen uses the two main criteria of 'imputability' and existence of 'State resources' in order to determine whether some contributions paid by final customers of electricity--which are then used to compensate for the costs of the mandatory purchase of wind energy by electricity distributors at above the market prices--amount to State aid.

Very briefly, under the controverted scheme, producers of wind energy benefit from an obligation of mandatory purchase of their electricity by energy distributors at prices above the market. Distribution companies can then claim full compensation for those additional costs (which are classed as costs derived from public service obligations) from CDC (Caisse des Dépôts group, which is a "public group serving general interest and economic development"). CDC's compensation is ultimately financed by the final consumers of electricity, who pay that compensation as part of their electricity bill.

According to AG Jääskinen, the scheme constitutes State aid because there is both State imputability and the measure is financed by State resources. As to the first element, the AG considers that the fact the contribution to be paid by consumers is directly determined in a law implies that the adoption of such a measure is imputable to the public powers of the French State (para 32 of hi Opinion). 

It is interesting to stress that the AG distinguishes this case from the very recent Doux Elevages Judgment by stressing that the intervention of the State in this case was not of a 'merely instrumental' nature, but that the French State took full ownership of the compensation scheme for producers of wind electricity (para 40).

As to the more controversial issue of the consumer contributions amounting to the existence of 'State resources', the AG stresses that 'the fact that these resources constantly remain under public control and, therefore, are available to the competent national authorities, suffices to qualify them as State funds to finance the measure, which then falls within the scope of Article 107(1) TFEU' (para 34, own translation from Spanish). AG Jääskinen confirms this positive finding in view of the control that the French State exercises over CDC, the status of CDC as the organism that intervenes in the transmission of the funds between consumers and distributors of energy, and the nature of the controverted funds.

In my view, it is worth noting that AG Jääskinen advocates for a rather streamlined test of 'origin/absorption' of private funds once they are managed by a public entity by clearly submitting that he does 'not agree with the general statement that the public nature of an organism does not entail that the resources available to it  are to be regarded as State funds' (para 46, own translation from Spanish). I think that this is an appropriate approach that would overcome a formalistic assessment of the avenues that financial support follows and, in the end, would broaden the definition of State aid under a more functional approach.

Also, and once more, AG Jääskinen distinguishes this case from the Doux Elevages Judgment by stressing the fact that all consumers are indiscriminately affected by the compensation scheme (regardless of their use of wind energy or not) and, consequently, the scheme is of a (quasi)fiscal nature (at least, this is my understading of his considerations in paras 50-54 of his Opinion). I think that this should also be welcome, as such an approach would contribute to limit the possibilities for States to effectively create (disguised) aid schemes by means of (pseudo)fiscal interventions.

In general, in my opinion, AG Jääskinen's Opinion in Vent de Colere should be welcome, not least because of his clear and well-thought proposals to distinguish (and restrict) the implications of the Doux Elevages Judgment. 

Let's hope that the CJEU follows him and also adopts a clear position towards limiting the potentially far-fetched implications of Doux Elevages.