In two landmark rulings on 20 September 2012, the General Court of the European Union (“GCEU”) in Luxembourg annulled the two European Commission (“Commission”) decisions on the Greek “lignite” case. Public Power Corporation of Greece (“PPC”) had initiated these procedures by filing two applications for annulment in 2008 and 2009. It is worth noting that the Hellenic Republic had intervened before the GCEU in favour of PPC.

This file comprised two cases before the GCEU:

Case T-169/08 concerned the application for annulment of the Commission’s decision of 5 March 2008 (the “2008 Decision”). This decision identified an infringement of articles 106(1) TFEU in conjunction with article 102 TFEU, i.e. State measures in favour of PPC which led (or could potentially lead) the latter to abuse its dominant position.

According to the Commission’s decision, Greece had violated EU law by giving PPC “quasi-exclusive” access to lignite. The latter is a soft brown fuel with characteristics that put it somewhere between coal and peat and constitutes (in the Commission’s opinion) the country’s cheapest available fuel.

The 2008 Decision concluded that Greece had created inequality of opportunities between economic operators as regards access to primary fuels for the production of electricity. This allegedly enabled PPC to maintain or reinforce its dominant position on the Greek wholesale electricity market by excluding or hindering market entry by new-comers.

Case T-421/09 concerned the application for annulment of the Commission’s decision of 4 August 2009 (the “2009 Decision”). This decision established the specific measures required to correct the anti-competitive effects of the infringement identified in the 2008 Decision.

The Commission decisions

The 2008 Decision

The Commission opened the lignite case in April 2003, following the submission of a complaint by an operator of the Greek electricity market. Five years of administrative procedure followed, during which the Hellenic Republic and PPC explained in detail the history, the functioning and the on-going transformation of the Greek electricity market. Nevertheless, and despite such a long investigation, the Commission effectively maintained its initial position and adopted the 2008 Decision.

The 2008 Decision mentioned certain indicative measures to remedy the alleged infringement, but it was for the Hellenic Republic to decide what these measures would ultimately be. The decision imposed, however, an obligation to inform the Commission of the final remedies within two months. Greece had to implement the latter within eight months from the 2008 Decision.

The 2009 Decision

Following the adoption of the 2008 Decision, the Hellenic Republic entered into discussions with the Commission as to its implementation. It did not, however, admit at any point the existence of any infringement of EU rules, as was also evidenced by its intervention in favour of PPC in case T-169/08.

The Commission adopted on 4 August 2009 the 2009 Decision, imposing upon the Hellenic Republic the following obligations:

  • To grant exploitation rights on the deposits of Drama, Elassona, Vevi and Vegora through tender procedures to entities other than PPC (unless no other reliable offer is made);
  • To prohibit the holders of exploitation rights of the deposits of Drama, Elassona and Vegora to sell the extracted lignite to PPC (unless no other reliable offer is made);
  • To carry out a new allocation procedure, if the on-going procedure to award the rights for the exploitation of the Vevi deposit is cancelled. In that procedure:
    • a potential bid by PPC will not be considered (unless no other reliable offer is made), and
    • the right holder will be prohibited to sell the extracted lignite to PPC (unless no other reliable purchase offer is made).

The 2009 Decision imposed a twelve month deadline for the Hellenic Republic to implement the above measures.

PPC’s applications for annulment

PPC’s application for annulment of the 2008 Decision was based on the following main legal grounds:

  • Incorrect definition of the relevant product and geographic market;
  • Incorrect application of the legal theory on the combined application of articles 106(1) and 102 TFEU;
  • Insufficient reasoning;
  • The violation of certain general principles such as legal certainty and proportionality.

PPC based its application for annulment of the 2009 Decision on similar legal grounds as those described above, and also on the absence of any necessity to impose a remedy.

In essence, PPC argued that the Commission had misconceived both the factual circumstances of the Greek market, but also the legal theory it applied to identify an infringement.

It must first be noted that the arguments below were developed by PPC in its application for annulment, but the GCEU only examined the argument on the application of the article 106/102 TFEU theory. Indeed, its acceptance was sufficient to annul the 2008 Lignite Decision. The explanations below therefore have not been confirmed by the GCEU, but represent PPC’s position.

The first thing the Commission misinterpreted was PPC’s share in the exploited Greek lignite deposits. PPC is the former electricity monopoly and it is thus only normal that it had an increased interest in the only fuel present in Greece and which can be used for the production of electricity. The Greek legislative framework allowed for anybody to request exploitation rights over lignite deposits. The Hellenic Republic had also committed during the administrative procedure that any exploitation rights over new mines would be awarded though open tender procedures. The provisions allowing for direct award of exploitation rights to PPC, unused since 1994, were also formally repealed.

Further, the Commission had incorrectly defined the relevant markets. The 2008 Decision defined the relevant upstream market as the wholesale electricity market. Therefore, the downstream relevant market could have only been the market of all fuels used to produce the electricity sold in the wholesale market (i.e. lignite but also gas, oil, hard coal, RES etc.). But even if the product market definition had been correct (quod non), the 2008 Decision was also wrong on its geographic scope: PPC had provided evidence of projects which intended to import lignite from neighbouring countries, which meant that the market in question was wider than national.

The 2008 Decision also considered that for the application of article 106(1) TFEU the qualification of PPC as an undertaking was sufficient. PPC on the other hand has consistently argued that the EU Court’s case-law requires also the existence of special or exclusive rights. If the Commission’s position was correct, it would suffice to privatise PPC, without changing anything else in the market, to remedy the alleged infringement.

Finally, the Commission refused to take into account significant developments in the Greek market put forward by PPC and the Hellenic Republic. These demonstrated that new operators were effectively entering the wholesale electricity market. The latter were simply more interested in gas-fuelled units due, inter alia, to the lower investment costs they required.

The GCEU ’s rulings

On 20 September 2012, the GCEU annulled the 2008 Decision. For the GCEU, the Commission had neither identified nor established to a sufficient legal standard what abuse, within the meaning of article 102 TFEU, the State measure in question had led or could have led the applicant to enter into. Since the 2008 Decision constituted the basis of the 2009 Decision, the annulment of the former inevitably resulted in the annulment of the latter as well.

The case is novel on many aspects.

First, the legal basis of article 106(1) TFEU in conjunction with article 102 TFEU is seldom used.

Second, this was the first time the GCEU had to rule on a direct application for annulment against a Commission decision based on this (rarely used) legal theory. All of the previous judgments on this legal theory were preliminary rulings, meaning that the GCEU (or the Court) had never assessed the Commission’s reasoning in this respect.

Finally, the GCEU clarified once and for all that when the Commission alleges an infringement of article 106(1) TFEU in conjunction with article 102 TFEU, it must not forget to also apply article 102 TFEU. Indeed, the 2008 Decision identified an alleged inequality of opportunities due to PPC’s privileged access to lignite. On that basis, it concluded on the violation of articles 106(1)/102 TFEU. The GCEU rejected the Commission’s reasoning and after examining all the relevant EU judgments, clarified that an actual or potential abuse needs to be identified by the Commission.

This results from the fact that article 106(1) TFEU has no independent application. It can only apply in combination with other provisions of the Treaty. The GCEU emphasised that simply mentioning another article of the Treaty (article 102 TFEU in this case) is not sufficient. The Commission needs to demonstrate something more, in this case the abuse of a dominant position to which the State measure led or could have led PPC to enter into.

Conclusion

Effectively, this means that no infringement exists, and therefore the EU has no legal basis to impose any remedy in this regard. This is a major victory for PPC. The following is now possible:

  • PPC’s privatisation can now be designed in an optimal manner without hindering the company’s development; and
  • The further restructuring of the Greek electricity market can be pursued without the constraints previously imposed by the annulled decisions.

From a purely legal perspective, the GCEU thus put limits on the Commission’s efforts to use freely and at its own discretion previous case-law in this type of case. For this reason, it would not be surprising to see the Commission appeal the GCEU’s rulings before the Court of Justice of the EU (“CJEU”). Should that be the case, the CJEU could uphold or quash the GCEU’s decision. In the latter case, it could itself give final judgment in the matter, if the state of the proceedings so permit, or refer the case back to the GCEU. If the case were referred back to the GCEU, it would be bound by the decision of the CJEU on points of law. In any event, if the GCEU’s decisions are quashed, either the CJEU or the GCEU will have to re-examine the facts and the arguments of the applicant, including those not assessed the first time.

Paris Anestis and his team have represented PPC throughout the administrative procedure and the judicial proceedings.