State aid: the former French financial support mechanism for solar radiative energy at risk

by White & Case LLP

White & Case LLP

By an order dated 15 March 20171, the European Court of Justice (“ECJ”) rules on the compatibility with the European State aid rules of the Ministerial Orders of 10 July 2006 and of 12 January 2010 setting out the feed-in tariffs of electricity produced by power plants using solar radiative energy.

This order was handed down following a reference for preliminary ruling by the Court of appeal of Versailles (Court of Appeal of Versailles, 8 December 2015) in a proceeding where the applicants claimed that the Ministerial Order of 10 July 2006 was illegal because it constituted a State aid within the meaning of article 107 of the Treaty on the Functioning of the European Union (“TFEU”), and had never been notified to the European Commission in violation of the so-called “standstill clause”. The Court of Appeal of Versailles decided to stay the proceedings and sought the preliminary ruling of the ECJ. The question asked by the Court of Appeal of Versailles was restated by the ECJ as whether the support scheme should be regarded as an intervention by the State or through State resources within the meaning of article 107 of TFEU.

In its order dated 15 March 2017, the ECJ considers that the French support scheme for electricity produced by power plants using solar radiative energy was the same as the one set up for wind-energy electricity provided for by two Ministerial Orders of 2008 which was qualified as State aid by the ECJ in a decision of 19 December 2013 (C-262/12). By analogy, the ECJ rules that Article 107(1) of TFEU must be interpreted as meaning that a mechanism for offsetting the additional costs imposed on undertakings because of an obligation to purchase electricity produced by power plants using solar radiative energy at a higher price than the market price that is financed by final consumers of electricity in the national territory, constitutes an intervention through State resources. The ECJ goes on to consider that it is for the referring Court to determine whether this support scheme constitutes a State aid within the meaning of Article 107 of TFEU and whether the three other conditions laid down in article 107 of TFUE are satisfied.

The ECJ further rules that, in case of violation of the standstill clause, it is for national courts to draw all the consequences of the illegality of the aid.

Following this preliminary ruling, and insofar as the feed-in tariffs system for electricity produced by power plants using solar radiative energy is the same as the one that was set up for wind-energy electricity in the two Ministerial Orders of 2008, the Court of appeal of Versailles is likely to conclude that the support scheme set up for electricity produced by power plants using solar radiative energy did qualify as State aid. The French Conseil d’Etat issued a similar ruling with respect to the wind-energy electricity support scheme (Conseil d’Etat, 28 April 2014, n°324852).

To the extent that the French feed-in tariffs for electricity produced by power plants using solar radiative energy had never been notified to the European Commission, French courts will have to draw all the consequences resulting from the illegality of the support scheme and notably the recovery of the financial support granted in disregard of State aid rules. In this regard, it is worth recalling that in a judgement dated 15 April 2016 (Conseil d’Etat, 15 April 2016, n°393721) with respect to wind-energy electricity, and in line with EU case law (for example ECJ, 12 February 2008, C-199/06), the Conseil d’Etat ultimately ordered the French State to take all necessary measures to ensure the payment, by each beneficiary of the State aid, of interests that they would have paid if they had to borrow the corresponding amounts granted pursuant to the annulled ministerial orders pending the decision issued by the Commission on 27 March 2014 (European Commission, 27 March 2014, SA. 36511) approving the French support scheme.

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