On 16 January 2018, the European General Court ("General Court") upheld the European Commission's ("Commission") decision ordering France to recover €1.37 billion in the context of State aid granted to Electricité de France ("EDF"). It held that the Commission was right to consider that the private investor test was not applicable.
The case dates back to 2003, when the Commission concluded that France conferred a selective advantage on EDF by not levying corporate tax on the reclassification of certain accounting provisions in the context of the restructuring of EDF's balance sheet and increase of its capital. Following appeals, the European Court of Justice annulled in 2012 the decision on the ground that the Commission was not entitled to decline, simply because France acted through the tax system, to apply the private investor test (i.e. to check whether a private investor would have invested a comparable amount under similar circumstances).
The Commission adopted a new negative decision in 2015, finding that the private investor test was not applicable and ordered France to recover from EDF €889 million for the tax waiver and €488 million in interest. EDF, supported by France, brought an appeal to annul the decision.
In its judgment, the General Court noted that the private investor test only applies if the Member State concerned granted the economic advantage as a shareholder and not as public authority. Contrary to EDF's claim, it confirmed that the measure at issue was a waiver of tax on the reclassification of the grantor's rights in capital and not a measure recapitalising the company.
The General Court also concluded that it is for the State to establish unequivocally that the measure implemented should be ascribed to the State acting as shareholder. To demonstrate this, the evidence would need to show clearly that, before or at the same time as conferring the advantage at issue, the State took the decision to make an investment. In this respect, the General Court found that the Commission had assessed all the evidence submitted to determine whether France acted as shareholder or as a public authority.
The General Court also observed that the evidence provided by EDF and France did not show economic evaluations made comparable to those a private investor would have done before implementing the measures in order to determine its future profitability.
By concluding that the Commission was correct to find that the private investor test was not applicable, the General Court reiterated that the applicability of the private investor test is by no means automatic and requires the State and the undertaking to set out contemporary evidence supporting such a conclusion.
With thanks to Jessica Bracker of Ashurst for her contribution.
