# C_2021072EN.01002601.xml

| 1.3.2021 | EN | Official Journal of the European Union | C 72/26 |
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1.3.2021

EN

Official Journal of the European Union

C 72/26

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Action brought on 15 December 2020 — Grupa Azoty and Others v Commission

(Case T-726/20)

(2021/C 72/39)

Language of the case: English

Parties

Applicants: Grupa Azoty S.A. (Tarnów, Poland), Azomureș SA (Tîrgu Mureş, Romania), Lipasmata Kavalas LTD Ypokatastima Allodapis (P. Fáliro, Greece) (represented by: D. Haverbeke, L. Ruessmann and P. Sellar, lawyers)

Defendant: European Commission

Form of order sought

The applicants claim that the Court should:

| — | annul Annex I of the Communication from the Commission — Guidelines on certain State aid measures in the context of the system for greenhouse gas emission allowance trading post-2021 (1), to the extent that it wrongfully excludes the fertilisers sector; |
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annul Annex I of the Communication from the Commission — Guidelines on certain State aid measures in the context of the system for greenhouse gas emission allowance trading post-2021 (1), to the extent that it wrongfully excludes the fertilisers sector;

| — | order, pursuant to Article 264 TFEU, that the effects of Annex I to the contested act be continued until such time as the defendant takes the measures necessary to comply with the Court’s decision pursuant to Article 266 TFEU; |
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order, pursuant to Article 264 TFEU, that the effects of Annex I to the contested act be continued until such time as the defendant takes the measures necessary to comply with the Court’s decision pursuant to Article 266 TFEU;

| — | order the defendant to pay the costs of these proceedings. |
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order the defendant to pay the costs of these proceedings.

Pleas in law and main arguments

In support of the action, the applicants rely on seven pleas in law.

| 1. | First plea in law, alleging that Annex I to the contested act is vitiated by a lack of competence.






  — | In accordance with Articles 5(1) and 5(2) TEU, the EU shall act only within the limits of the competence conferred upon it by the Member States. Competences not conferred upon the EU by the Treaties remain with the Member States; |
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1.

First plea in law, alleging that Annex I to the contested act is vitiated by a lack of competence.

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In accordance with Articles 5(1) and 5(2) TEU, the EU shall act only within the limits of the competence conferred upon it by the Member States. Competences not conferred upon the EU by the Treaties remain with the Member States;

| — | It is not the defendant but the Member States that are competent, under Article 10a(6) of Directive 2003/87/EC, as amended (2), to identify the sectors and subsectors and adopt a list as in Annex I to the contested act. |
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It is not the defendant but the Member States that are competent, under Article 10a(6) of Directive 2003/87/EC, as amended (2), to identify the sectors and subsectors and adopt a list as in Annex I to the contested act.

| 2. | Second plea in law, alleging that Annex I to the contested act is vitiated by an infringement of an essential procedural requirement (statement of reasons).






  — | The statement of reasons of the contested act required by Article 296 TFEU fails to disclose clearly and unequivocally the reasoning followed by the defendant in calculating the indirect emission intensity figure for the applicants’ sector, which is the determinative factor of inclusion or exclusion from the Annex I to the contested act; |
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2.

Second plea in law, alleging that Annex I to the contested act is vitiated by an infringement of an essential procedural requirement (statement of reasons).

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The statement of reasons of the contested act required by Article 296 TFEU fails to disclose clearly and unequivocally the reasoning followed by the defendant in calculating the indirect emission intensity figure for the applicants’ sector, which is the determinative factor of inclusion or exclusion from the Annex I to the contested act;

| — | As a consequence of this failure to state reasons, the applicants are unable to defend their rights and the Court is unable to exercise its supervisory jurisdiction. |
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As a consequence of this failure to state reasons, the applicants are unable to defend their rights and the Court is unable to exercise its supervisory jurisdiction.

| 3. | Third plea in law, alleging that Annex I to the contested act is vitiated by manifest errors of assessment.






  — | In the context of its discretion when carrying out complex economic and social assessments in the exercise of its competence under Article 107(3)(c) TFEU, the defendant must be able to show that it evaluated all the relevant factors and circumstances of the situation which the contested act was intended to govern. The defendant committed several manifest errors of assessment when excluding the applicants’ sector from the list of eligible sectors contained in Annex I to the contested act, notably by (a) failing to take into account the relevant and complete electricity consumption data of the fertiliser sector to determine the sector’s indirect emission intensity, which led to the underestimation of the sector’s indirect emission intensity and to its exclusion from Annex I; (b) failing to take into account and examine all relevant facts provided by the application, as it disregarded the evidence, without stating reasoning, of the applicants; (c) with regard to the qualitative assessment, incorrectly assessing the sector’s qualification on the fuel/electricity substitutability criterion and failing to substantiate why the sector’s subsectors were not included in Annex I based on this criterion. |
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3.

Third plea in law, alleging that Annex I to the contested act is vitiated by manifest errors of assessment.

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In the context of its discretion when carrying out complex economic and social assessments in the exercise of its competence under Article 107(3)(c) TFEU, the defendant must be able to show that it evaluated all the relevant factors and circumstances of the situation which the contested act was intended to govern. The defendant committed several manifest errors of assessment when excluding the applicants’ sector from the list of eligible sectors contained in Annex I to the contested act, notably by (a) failing to take into account the relevant and complete electricity consumption data of the fertiliser sector to determine the sector’s indirect emission intensity, which led to the underestimation of the sector’s indirect emission intensity and to its exclusion from Annex I; (b) failing to take into account and examine all relevant facts provided by the application, as it disregarded the evidence, without stating reasoning, of the applicants; (c) with regard to the qualitative assessment, incorrectly assessing the sector’s qualification on the fuel/electricity substitutability criterion and failing to substantiate why the sector’s subsectors were not included in Annex I based on this criterion.

| 4. | Fourth plea in law, alleging that Annex I to the contested act is vitiated by a misapplication of the correct assessment criterion.






  — | Article 10(a)(6) of Directive 2003/87/EC requires that sectors be considered against a criterion involving the assessment of ‘genuine risk’ of carbon leakage; |
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4.

Fourth plea in law, alleging that Annex I to the contested act is vitiated by a misapplication of the correct assessment criterion.

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Article 10(a)(6) of Directive 2003/87/EC requires that sectors be considered against a criterion involving the assessment of ‘genuine risk’ of carbon leakage;

| — | The defendant applied a different test, that of ‘significant risk’. By doing so, it applied the wrong lawful test. |
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The defendant applied a different test, that of ‘significant risk’. By doing so, it applied the wrong lawful test.

| 5. | Fifth plea in law, alleging that Annex I to the contested act infringes the principle of transparency.






  — | The process leading to the adoption of the contested act lacked transparency in key respects, in particular: (a) the defendant failed to disclose the data used to calculate the indirect emission intensity figure calculated for the applicants’ sector in either the contested act or the accompanying impact assessment; (b) the defendant failed to provide explanations substantiating its assessment on which subsectors have the highest potential for electrification. |
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5.

Fifth plea in law, alleging that Annex I to the contested act infringes the principle of transparency.

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The process leading to the adoption of the contested act lacked transparency in key respects, in particular: (a) the defendant failed to disclose the data used to calculate the indirect emission intensity figure calculated for the applicants’ sector in either the contested act or the accompanying impact assessment; (b) the defendant failed to provide explanations substantiating its assessment on which subsectors have the highest potential for electrification.

| — | Throughout the contested act’s adoption process, the defendant refused to communicate to the concerned parties how their indirect emission intensity figure would be calculated and how the electrification criterion would be applied, thus preventing them from entering into any substantive discussion with the defendant during the consultation periods; |
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Throughout the contested act’s adoption process, the defendant refused to communicate to the concerned parties how their indirect emission intensity figure would be calculated and how the electrification criterion would be applied, thus preventing them from entering into any substantive discussion with the defendant during the consultation periods;

| — | The defendant therefore failed to comply with its obligations under Article 15 TFEU and Article 11 TEU to ensure the transparency of the process leading to the adoption of Annex I to the contested act. |
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The defendant therefore failed to comply with its obligations under Article 15 TFEU and Article 11 TEU to ensure the transparency of the process leading to the adoption of Annex I to the contested act.

| 6. | Sixth plea in law, alleging that Annex I to the contested act infringes the principle of subsidiarity.






  — | According to Article 5(3) TFEU, the European Union only acts, in areas which do not fall within its exclusive competence, if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved at EU level; |
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6.

Sixth plea in law, alleging that Annex I to the contested act infringes the principle of subsidiarity.

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According to Article 5(3) TFEU, the European Union only acts, in areas which do not fall within its exclusive competence, if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved at EU level;

| — | While the national measures based on Article 10a(6) of Directive 2003/87/EC are subject to State aid control, the defendant breached the principle of subsidiarity by determining an ex ante list limiting the sectors and subsectors that can be eligible for indirect emission costs compensation, since (a) Member States are best placed to assess the genuine risk of carbon leakage for each industrial sector due to significant indirect costs actually incurred; and (b) the defendant adopted Annex I without providing a sufficient explanation of the necessity to do so. |
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While the national measures based on Article 10a(6) of Directive 2003/87/EC are subject to State aid control, the defendant breached the principle of subsidiarity by determining an ex ante list limiting the sectors and subsectors that can be eligible for indirect emission costs compensation, since (a) Member States are best placed to assess the genuine risk of carbon leakage for each industrial sector due to significant indirect costs actually incurred; and (b) the defendant adopted Annex I without providing a sufficient explanation of the necessity to do so.

| 7. | Seventh plea in law, alleging that Annex I to the contested act infringes the proportionality principle.






  — | The defendant infringes the proportionality principle as it: (a) fails to seek to achieve the legitimate objective which is to incentivise a cost-effective decarbonisation of the economy by allowing energy-intensive sectors to invest in energy efficiency instead of shifting their production to third countries; (b) places an excessive burden on the excluded sectors while less burdensome solutions (such as setting maximum aid levels or conditionality mechanisms) would meet the objectives of the contested act at least in the same way; and (c) revealed the core details of its assessment of the eligible sectors only four days prior to publication of the contested act on 25 September 2020, which itself is only a little over three months prior to the expiry of the currently applicable Emission Trading Scheme Guidelines. By doing so, the defendant infringes Article 5(4) TEU. |
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7.

Seventh plea in law, alleging that Annex I to the contested act infringes the proportionality principle.

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The defendant infringes the proportionality principle as it: (a) fails to seek to achieve the legitimate objective which is to incentivise a cost-effective decarbonisation of the economy by allowing energy-intensive sectors to invest in energy efficiency instead of shifting their production to third countries; (b) places an excessive burden on the excluded sectors while less burdensome solutions (such as setting maximum aid levels or conditionality mechanisms) would meet the objectives of the contested act at least in the same way; and (c) revealed the core details of its assessment of the eligible sectors only four days prior to publication of the contested act on 25 September 2020, which itself is only a little over three months prior to the expiry of the currently applicable Emission Trading Scheme Guidelines. By doing so, the defendant infringes Article 5(4) TEU.

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(1)  OJ 2020 C 317, p. 5.

(2)  Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32), as amended.

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