The General Court has annulled a Commission decision declaring certain fiscal measures implemented by France for EDF (Eléctricité de France) to be incompatible with the common market, on grounds that the Commission did not conduct a private investor test to back its findings.
The Luxembourg-based General Court’s annulment of the Commission’s decision comes after an in-depth examination of the tax scheme that EDF were subject to and of its investigation by the Commission.
On 16 December 2003, the Commission adopted a decision in which it took the view that EDF had enjoyed a tax concession worth an estimated EUR 888.89 million corresponding to the corporation tax that EDF did not pay in 1997, a sum EDF has since paid back to the French state with interest.
The Commission affirmed that since that fiscal aid had the effect of strengthening EDFs competitive position in relation to its competitors, it was incompatible with the common market.
On 27 April 2004 EDF, supported by the French Republic, brought an action before the General Court for the annulment of that decision. As part of its action EDF insisted that the measure at issue was an additional capital injection in an amount equivalent to the partial tax exemption.
EDF accordingly argued that the Commission could not refuse to examine whether the French State, EDFs sole shareholder, had acted like a private investor in a market economy, via means of a private investor test.
The private investor test consists in establishing 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 light of the Commission’s refusal to acknowledge the French Republic as a private investor, the General Court noted that the Commission erred in its findings and infringed the rules governing State aid. As such the General Court ruled in favour of EDF in its appeal on 15 December 2009, the ruling was based on two findings
Firstly, in the circumstances of the present case, in which, in 1997, the French State was both the fiscal creditor of a public undertaking and its sole shareholder. The General Court held that the restructuring of EDFs balance sheet and the capital injection it received had to be analysed as a whole.
Secondly, that the fact that the capital derived in part from a fiscal debt did not preclude the measure from being examined in the light of the private investor test.
European Court of Justice – Justice and Application – Full texts