In its Judgment of 12 November 2013 in case T-499/10 MOL v Commission, the General Court has found that an authorisation agreement that froze the mining fees payable for the explotaition of hydrocarbon reserves and that exempted the beneficiary from complying with a posterior law that increased the applicable mining fees does not constitute State aid incompatible with the internal market. In my view, the Judgment is interesting for the guidance it provides regarding the analysis of two-part or complex State aid measures.
In the case, MOL and the Hungarian State entered into an authorisation agreement in 2005 whereby the mining rights assigned to MOL were extended and the mining fees payable in return were determined on a non-revisable basis for the period 2005-2020. Later, a 2008 law reform significantly increased the mining fees that would have been payable for the exploitation of those same fields. However, in view of the 2005 agreement, MOL was exempted from topping up the mining fees it was liable to pay. Competitiors and potential new entrants were subject to the revised (higher) fees.
The Commission took the view that, given the way the 2005 agreement and the provisions of the 2008 amendment had been designed, they should be regarded as part of the same measure and it concluded that their combined effect conferred an unfair advantage to MOL.
According to the Commission, even if the 2005 agreement was concluded in accordance with the Mining Act then in force and even if it was up to the Member State to set the mining fees, the effects produced were not necessarily compatible with the State aid rules of the Treaty, although, taken in isolation, neither the 2005 agreement nor the 2008 amendment was contrary to these rules.
It is important to stress that MOL was the only operator in the hydrocarbons sector to have obtained an extension of its mining rights, since other extension agreements concerned undertakings extracting solid minerals, for which mining fees were not amended. The Commission considered that the measure fulfilled the criteria enshrined in Article 107(1) TFEU and should be considered as State aid, and that there was nothing to indicate that it could be compatible with the internal market.
The Hungarian authorities challenged the Commission's position arguing that the measure did not constitute State aid, since the 2005 agreement conferred MOL no advantage and was not selective, as the company received no preferential treatment resulting from that agreement. Hungary further stressed that undertakings making large investments in mining projects require long‑term certainty in respect of the applicable mining fees and charges and that, consequently, mining fees subject to agreement should be fixed and stable for the entire duration of the respective agreement.
The GC has reviewed the Commission's decision and, mainly on the basis of the 'selectivity' requirement under Article 107(1) TFEU, has found that:
46 [...] although the Commission considered that the contested measure had, in those two constituent elements, favoured the applicant, it drew attention to the fact that the extension agreement was, by itself, selective, on account of the manner in which it had been negotiated and concluded [...]. In stating that the 2005 agreement and the 2008 amendment had resulted in the applicant’s benefiting from lower mining fees than those of the other operators until 2020, the Commission drew attention to the selective nature of the 2005 agreement vis-à-vis the applicant only [...], since the benefit of such mining fees stems solely from the agreement, which sets the rate of the increased mining fee for each of the fifteen years of duration of the agreement, and which provides that the rates thus set will be determined solely in accordance with its provisions and that those rates will stay unchanged [...]. Moreover, by concluding that the applicant was subject to a specific regime shielding it from any increase in mining fees [...], the Commission necessarily took the view that the criterion of selectivity of the contested measure had been met, on the ground that, in the light of its characteristics mentioned above, the 2005 agreement was selective. [...]
54 With respect to the selective nature of the aid measure, it must also be observed that Article 107(1) TFEU does not distinguish between measures of State intervention by reference to their causes or their aims but defines them in relation to their effects (Case C‑409/00 Spain v Commission [2003] ECR I‑1487, paragraph 46). It follows that the application of that provision only requires it to be determined whether under a particular statutory scheme a State measure is such as to favour ‘certain undertakings or the production of certain goods’ over others which are in a legal and factual situation that is comparable in the light of the objective pursued by the measure in question (see Spain v Commission, paragraph 47 and the case-law cited). If so, the aid measure satisfies the condition of selectivity which defines State aid as laid down by that provision. [...]
62 As a preliminary point, it should be recalled that the contested measure consists of two elements, namely the 2005 agreement, which sets mining fee rates for all the applicant’s fields, whether in production or the subject of extension, for each of the fifteen years of duration thereof, and the 2008 amendment, which increases mining fee rates for all hydrocarbon fields under authorisation, but does not contain any provisions relating to fields that have already been the subject of an extension agreement.
63 In that regard, it should be noted at the outset that the Commission was right to state [...] that the 2005 agreement is not contrary to the State aid rules. Since the fees stipulated by the 2005 agreement, which were applicable to both fields already in production and fields concerned by extension of authorisation, were higher than the statutory fees applicable at the time of its conclusion, that agreement did not involve any State aid element for the purposes of Article 107 TFEU.
64 Next, the Court considers that, where a Member State concludes with an economic operator an agreement which does not involve any State aid element for the purposes of Article 107 TFEU, the fact that, subsequently, conditions external to such an agreement change in such a way that the operator in question is in an advantageous position vis‑à‑vis other operators that have not concluded a similar agreement is not a sufficient basis on which to conclude that, together, the agreement and the subsequent modification of the conditions external to that agreement can be regarded as constituting State aid.
65 In the absence of such a principle, any agreement that an economic operator might conclude with a State which does not involve any State aid element for the purposes of Article 107 TFEU would always be open to challenge, where the situation on the market on which the operator party to the agreement is active evolves in such a way that an advantage is conferred on it [...] or where the State exercises its regulatory power in an objectively justified manner following a market evolution whilst observing the rights and obligations resulting from such an agreement.
66 However, a combination of elements such as that observed by the Commission in the contested decision may be categorised as State aid where the terms of the agreement concluded were proposed selectively by the State to one or more operators rather than on the basis of objective criteria laid down by a text of general application that are applicable to any operator. In that regard, it must be pointed out that the fact that only one operator has concluded an agreement of that type is not sufficient to establish the selective nature of the agreement, since that may result inter alia from an absence of interest by any other operator.
67 Moreover, it should be recalled that, for the purposes of Article 107(1) TFEU, a single aid measure may consist of combined elements on condition that, having regard to their chronology, their purpose and the circumstances of the undertaking at the time of their intervention, they are so closely linked to each other that they are inseparable from one another (see, to that effect, Joined Cases C‑399/10 P and C‑401/10 P Bouygues and Bouygues Télécom v Commission and Others and Commission v France and Others [2013] ECR I‑0000, paragraphs 103 and 104). In that context, a combination of elements such as that relied upon by the Commission in the contested decision may be categorised as State aid where the State acts in such a way as to protect one or more operators already present on the market, by concluding with them an agreement granting them fee rates guaranteed for the entire duration thereof, whilst having the intention at that time of subsequently exercising its regulatory power, by increasing the fee rate so that other market operators are placed at a disadvantage, be they operators already present on the market on the date on which the agreement was concluded or new operators.
68 It is in the light of those considerations that it is necessary to examine whether, in the present case, the Commission was entitled to consider that the contested measure was selective, on the ground that, in so far as the 2005 agreement sets the rate of the increased mining fee for each of the fifteen years of its duration and provides that the rates thus set would remain unchanged, it was selective (T-499/10 at paras 46-68, emphasis added).
On the basis of the very specific circumstances of the case, the GC finds that the 2005 agreement was not selective that its combination with the 2008 amendment does not alter this finding and, consequently, annuls the Commission's incompatibility Decision.
Beyond the specific circumstances of the case, I think that the analytical framework sketched by the GC includes some useful guidance [such as the stress on the close chronological requirement, or the selectivity element (implicitly) required in all the components of a two-stage or complex State aid measure] but also some troubling hints at a less than objective assessment.
In that respect, regardless of the emphasis put on the standard legal position that 'Article 107(1) TFEU does not distinguish between measures of State intervention by reference to their causes or their aims but defines them in relation to their effects' (para 54), the GC goes on to stress that 'a combination of elements such as that relied upon by the Commission in the contested decision may be categorised as State aid where the State acts in such a way as to protect one or more operators already present on the market, by concluding with them an agreement granting them fee rates guaranteed for the entire duration thereof, whilst having the intention at that time of subsequently exercising its regulatory power, by increasing the fee rate so that other market operators are placed at a disadvantage' (para 67). Therefore, the GC does build in an element of (reverse) causality or, probably more accurately, of volition or intention that seems extraneous to the State aid control system.
If Article 107(1) TFEU is meant to avoid distortions of competition in the internal market, when confronted with sequential, two-part or complex aid measures, the fact that they all formed part of a 'master plan' from the outset or are the 'random or supervening' result of discrete interventions should be irrelevant. Otherwise, the burden of proving 'distortive intent' from the outset may simply make it impossible to pursue these cases. However, it may well be that the remarks made by the GC in para 67 of MOL v Commission will remain a 'mere' obiter dictum and that the assessment of two-part or complex measures will remain much more objective in the future (as indeed, is the case with the rest of the Judgment).