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EU Court dismisses appeal of rejection of State aid complaint by Irish Association

AUTHORs: Kate McKenna co-author(s): Neringa Juodkunaite Services: EU, Competition & Regulatory DATE: 06/10/2021

Irish businesses have become more aware of the potential to submit State aid complaints against Irish law measures to the European Commission (the “EC”).  A recent ruling of the EU General Court illustrates the experience of an Irish business bringing a State aid complaint, from start to finish.  It also illustrates the challenging nature of the legal standard which must be met for a complaint to succeed, and in particular that an apparent unfairness and difference in treatment between parties in competition with each other will often not satisfy that standard.

Background

In February 2016, the Irish Wind Farmers Association (the “IWFA”) lodged a complaint with the EC about an alleged unlawful State aid to fossil fuel businesses in Ireland, on the basis that ‘commercial rates’ for windfarms are higher than those for fossil fuel generators.

The alleged tax State aid arises from how the Valuation Office of Ireland (the “VOI”) calculates the Net Annual Value (the “NAV”) of an electricity generator’s property, in particular by estimating the annual amount of rent which can be expected from letting that property.  More specifically, the IWFA’s complaint was that fossil fuel generators benefit from undervaluation of their NAV due to application of a more favourable “contractor’s method” of valuation than the “receipts and expenditure method” which is applied to wind farms. 

EC Decision

On 9 July 2019, after examining the complaint, the EC concluded that the different valuation methods did not constitute State aid.  In particular, the EC considered, first, that it had not been established that the contested measure had conferred an advantage on fossil fuel generators and, second, that, even if an advantage arose, it is not selective because it can be objectively distinguished and justified by whether or not reliable financial information is available[1].

Appeal

The IWFA and three of its members: Carrons Windfarm, Foyle Windfarm and Greenoge Windfarm, initiated an appeal case of the EC decision to the General Court.  Their case argued that the EC should have had serious doubts as to the presence of State aid and should have opened the formal investigation procedure, and had thereby infringed interested parties’ rights under Article 108(2) TFEU and Article 4(4) of Regulation 2015/1589.

Five years after the original complaint was made, on 7 July 2021, the General Court dismissed their case, on grounds that the evidence presented by the applicants did not justify their assertion that there should have been a formal investigation procedure.  In addition, the General Court found that the applicants had failed to evidence that applying different valuation methods for different circumstances and types of properties was unfair and held that the said commercial rates were a tax on the value of property rather than a tax on an activity type (ie, electricity production). [2]


[1]European Commission decision SA.44671 (2019/NN), available from: https://ec.europa.eu/competition/state_aid/cases1/201929/279333_2083564_81_2.pdf 

[2]Case T- 680/19 Irish Wind Farmers’ Association and Others v Commission, available from: https://curia.europa.eu/juris/document/document.jsf?text=&docid=243842&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&=1&cid=91189