Parties

Grounds

Operative part



Parties

In Case T‑156/04,

Électricité de France (EDF), established in Paris (France), represented by M. Debroux, lawyer,

applicant,

supported by

French Republic, represented by G. de Bergues and A.‑L. Vendrolini, acting as Agents,

intervener,

v

European Commission, represented by J. Buendía Sierra and C. Giolito, acting as Agents,

defendant,

supported by

Iberdrola, SA, established in Bilbao (Spain), represented by J. Ruiz Calzado and É. Barbier de La Serre, lawyers,

intervener,

APPLICATION for annulment of Articles 3 and 4 of the Commission Decision on aid measures in favour of EDF and the electricity and gas industries (C 68/2002, N 504/2003 and C 25/2003) adopted on 16 December 2003,

THE GENERAL COURT (Third Chamber),

composed of J. Azizi, President, E. Cremona and S. Frimodt Nielsen (Rapporteur), Judges,

Registrar: C. Kristensen, Administrator,

having regard to the written procedure and further to the hearing on 25 November 2008,

gives the following

Judgment

Grounds

Legal context

Rules of the EC Treaty

1. Under Article 87(1) EC, save as otherwise provided in the Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade between Member States, to be incompatible with the common market.

2. Under Article 88(1) and (2) EC:

‘1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.’

Regulation (EC) No 659/1999

3. Article 1(b) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1), provides:

‘[…] “existing aid” shall mean:

(i) … all aid which existed prior to the entry into force of the Treaty in the respective Member States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the Treaty;

…

(v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State. Where certain measures become aid following the liberalisation of an activity by Community law, such measures shall not be considered as existing aid after the date fixed for liberalisation;’

4. Article 15(1) of Regulation No 659/1999 provides that the powers of the European Commission to recover aid are to be subject to a limitation period of ten years.

5. Under Article 15(2) of Regulation No 659/1999, the limitation period is to begin on the day on which the unlawful aid is awarded to the beneficiary.

6. The first sentence of Article 20(1) of Regulation No 659/1999 provides that any interested party may submit comments pursuant to Article 6 of that regulation following a Commission decision to initiate the formal investigation procedure.

Relevant French law

7. Article 38(2) of the General Tax Code provides:

‘The net profit is the difference between the value of the net assets at the close and at the opening of the period for which the surplus constitutes the taxable income, with the deduction of additional contributions and the addition of amounts withdrawn by the owners or members in that period. Net assets are the amount by which the assets exceed that portion of total liabilities comprising third-party liabilities, verifiable depreciation and provisions.’

8. Article 4(I) and (II) of Law No 97-1026 of 10 November 1997 concerning urgent fiscal and financial measures (JORF (Official Gazette of the French Republic), 11 November 1997, p. 16387) provides:

‘I. The structures of the high-voltage electricity transmission network are deemed to have been owned by Électricité de France since it was granted the concession for that network.

II. For the purposes of applying the provisions of [paragraph] I, as at 1 January 1997, the value of the assets in kind allocated under concession to the high‑voltage transmission network appearing as liabilities on Électricité de France’s balance sheet shall be entered, net of the corresponding revaluation differences, under the item “Capital injections”.’

Facts giving rise to the dispute

General background to the case

9. The applicant, Électricité de France (‘EDF’), produces, transmits and distributes electricity, particularly throughout France.

10. In 2002, when the decision to initiate the procedure laid down in Article 88(2) EC was adopted, EDF was wholly owned by the State, the French Prime Minister appointed its director and its policy was established in close cooperation with the French Ministry of Energy.

11. EDF was created by French Law No 46-628 of 8 April 1946 on the nationalisation of electricity and gas (JORF, 9 April 1946, p. 2651), which nationalised the electricity sector in France. It was created with public enterprise status.

12. Article 36 of Law No 46-628 established the principle of transferring to EDF the nationalised electricity concessions, making the concessionaire responsible for observing the new standard contractual conditions, to be drawn up as provided for in Article 37 of that law.

13. In 1958, the various electricity transmission concessions granted by the State were unified into a single concession known as the ‘high-voltage transmission network’ (‘the RAG’), the contractual conditions of which were approved by Decree No 56‑1225 of 28 November 1956 (JORF, 4 December 1956, p. 11562).

14. Article 2 of those contractual conditions sets out in detail the assets which form part of the concession (lines, pylons, etc.) and Article 8 thereof states that EDF is required to carry out ‘at its own expense all maintenance and renewal works needed to keep the structures subject to the concession in good working order’.

15. Following an amendment introduced by the Decree of 23 December 1994 (JORF, 28 December 1994, p. 18564), Article 2 of the contractual conditions was reworded as follows:

‘The lines, pylons and, in general, any existing or future electricity structures required by the concessionaire to carry out his activity of transmitting and supplying electricity, with the exception of generation facilities, shall form part of the concession.

…’

16. However, the RAG was, in the past, distinguished from other forms of concessions, in particular in so far as, first, it did not specify the system of ownership governing the assets under concession, secondly, it contained no clause on the rules governing the retrocession of the assets under concession and, thirdly, it was for an exceptionally long period of 75 years.

17. In the absence of accounting rules specific to concessions and in agreement with the National Accountancy Council (CNC), EDF was deemed to have been the owner of the RAG since 1946.

18. The assets forming part of the RAG were therefore entered as EDF’s own assets in its balance sheet and for accounting purposes were governed by ordinary law and depreciated using the ‘historical cost method’, which resulted in straight-line depreciation throughout the useful life of the structures and was the case until 1986.

19. The application to EDF of the General Accounting Plan of 1982, which included accounting rules specific to concessions, led to a change in the accounting treatment of the RAG from 1987, in order to take into account the recommendations made in 1975 by the CNC in its ‘Guide for Concessions’.

20. This took into account the specific constraints which must be faced by concessionaires, who are bound by the obligation to return assets under concession in good working order when the concession ends, in accordance with the ‘principle of the sustainability of public services’.

21. In addition to requiring concessionaires to record fixed assets under concession under a specific balance sheet item, the General Accounting Plan of 1982 sets out the following principle:

‘Maintaining the productive potential of the installations under concession at the level required by the public service must be sought through depreciation or, possibly, through adequate provisions. In so far as the utility value of an installation may be conserved through suitable maintenance, that installation shall not be the subject-matter, with respect to the concessionaire’s operating expenses, of contributions to allowances for depreciation. The provisions which may be used for maintaining productive potential are provisions for renewal.’

22. Under the General Accounting Plan of 1982, an accounting plan specific to EDF was introduced. That accounting plan received the assent of the CNC on 19 December 1984 and was subsequently approved by the Interministerial Order of 21 December 1986 (JORF, 30 December 1986, p. 15794).

23. Under the accounting plan specific to EDF, the RAG was entered in the assets on EDF’s balance sheet under the item ‘Fixed assets operated under the concession’.

24. Specific provisions in respect of the renewal of the fixed assets operated under the concession were included in the straight-line depreciation arising from application of the ‘historical‑cost method’, provisions which were intended to allow the concessionaire to return those assets to the grantor in perfect condition at the end of the concession.

25. Provisions for renewal were created between 1987 and 1996.

26. Expenditure for renewal incurred by EDF was recorded in the balance sheet item entitled ‘Value in kind of assets operated under concession’.

27. That item, also called ‘Grantor rights’, represented a debt of EDF owed to the French State, linked with the return without consideration of the replaced assets at the end of the concession.

28. In a 1994 report, however, the French Cour des Comptes (Court of Auditors) took the following view:

‘The accounting principles derogating from ordinary law are based on an actual term in the concession contract which alone makes it possible to draw a distinction between renewable and non-renewable fixed assets. Taking account of that term is the rationale for the accounting arrangement. It determines whether it is possible to return the fixed assets operated under the concession to the grantor of the concession and justifies the posting of the grantor rights as liabilities in the balance sheet. It is the basis for the existence and the deductibility of the provision for renewal, which makes it possible to record the cost to the concessionaire represented by the return to the grantor of the last fixed asset which has become non-renewable…

Where a public undertaking is a permanent concessionaire of the State by virtue of the legislation on nationalisation itself, it is necessary to raise the question of whether the distinction made in the accounts between the assets under concession and the concessionaire’s assets actually exists, and state that the absence of an end date for the concession means that it is not possible to apply the recommendations of the accounting guide for concessionaire undertakings.’

29. The French Cour des Comptes also noted the irregular nature of the tax relief received by EDF following the irregular creation of the provisions for renewal of the RAG.

30. The French State therefore undertook to clarify the legal and financial regime governing the RAG and to restructure EDF’s balance sheet.

31. The ‘State-EDF 1997-2000’ management contract, signed on 8 April 1997, provided for normalisation of the undertaking’s accounts and of its financial relationship with the State, with a view to the opening up of the market in electricity laid down by Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20):

‘The market for electricity is… being transformed. Within the European Union, rules on the functioning of the internal market in electricity have just been established…

Finally, these contractual commitments will also seek to stabilise the financial relationship between the State and EDF and to clarify the exercise of State supervision over EDF, by guaranteeing the undertaking’s independence in the context of a joint venture…

EDF’s balance sheet will be restructured, with the two-fold aim of strengthening the undertaking’s net assets and stabilising the financial relationship between the State and the undertaking on a basis similar to ordinary law. Legislation will be presented to the Parliament in 1997, so that the date of entry into force of that restructuring shall be 1 January 1997.’

32. Those were the circumstances in which Law No 97-1026 was adopted.

33. Prior to the adoption of that law, EDF’s balance sheet was presented as follows:

– on the assets side, an item entitled ‘Fixed assets operated under the concession’ in the amount of 285.7 billion French francs (FRF), of which approximately FRF 90 billion was in respect of the RAG;

– on the liabilities side, an item entitled ‘Provisions’ of which approximately FRF 38.5 billion was in respect of the RAG, and an item entitled ‘Value in kind of assets operated under concession’ recording the expenditure for renewal incurred. That item amounted to FRF 145.2 billion, of which 18.3 billion was in respect of the RAG.

34. Following the adoption of Law No 97-1026 and pursuant to Article 4 thereof, the following was decided:

– first, the assets constituting the RAG were reclassified, in the amount of FRF 90.325 billion, as ‘own assets’ and thereby ceased to be classified as ‘assets operated under concession’;

– secondly, the unused provisions for renewal of the RAG, in the amount of FRF 38.521 billion, were posted as retained earnings without flowing through the profit and loss account and were reclassified in the amount of FRF 20.225 billion as accumulated losses, that account being thereby reconciled and the balance of FRF 18.296 being allocated to the reserves. Although not flowing through the profit and loss account, those reclassifications resulted in the posting of taxable revenue, which was taxed at the rate of 41.66% pursuant to Article 38(2) of the General Tax Code;

– thirdly, the ‘grantor rights’ were allocated directly to the capital injections item in the amount of FRF 14.119 billion (of a total of FRF 18.345 billion) without flowing through the profit and loss account, with the balance being recorded in various revaluation accounts.

35. That restructuring of the upper part of EDF’s balance sheet is explained in Annex 1 to the letter addressed to EDF on 22 December 1997 by the Minister for Economic Affairs, Finance and Industry, the State Secretary for the Budget and the State Secretary for Industry.

Administrative procedure

36. By letters of 10 July and 27 November 2001, the Commission invited the French authorities to provide certain information on a number of measures taken in respect of EDF and capable of involving State aid.

37. The French authorities communicated certain information to the Commission by letters of 12 October 2001 and 21 February 2002. By letter of 9 April 2002, they provided detailed information, contained in a memorandum from the Directorate‑General for Taxation of the French Ministry of Economic Affairs, Finance and Industry (‘the Directorate-General for Taxation’), in which it was stated, inter alia, that:

‘The line of argument that the reclassification for accounting and tax purposes of the provisions for renewal relating to the [RAG] carried out in 1997 allowed the consolidation of an unjustified tax concession cannot be upheld. In that regard, a distinction must be drawn between the reclassification of the provisions for renewal that were used, which appeared, according to the information provided by EDF, under the item ‘[G]rantor rights’ in the amount of 14.119 [billion FRF] rather than 18.345 [billion FRF], and the reclassification of the still-unused provisions amounting to 38.5 [billion FRF].

The grantor rights in respect of the RAG represent an unowed debt which was unjustifiably exempted from tax by being incorporated into the capital.

Those provisions were incorporated into the capital without incurring any tax, since the RAG did not fall within the fiscal and accounting arrangements governing concessions. Since the RAG constituted own assets, EDF had no debt obligation towards the State to return those assets, with the result that the corresponding amounts posted in the item ‘[G]rantor rights’ constitute not actual liabilities, but a non-tax-exempt reserve. Under those circumstances, before that reserve was incorporated into the capital, it should have been transferred from the enterprise’s liabilities, where it was incorrectly posted, to a net assets account, thereby resulting in a positive variation in net worth that was taxable under Article 38[(2)], referred to above.

The tax advantage thus obtained may be assessed at 5.88 [billion FRF] (14.119 x 41.66%).

At the same time, it must be noted that the normalisation of the accounts carried out by the direct allocation to the ‘retained earnings’ account, without flowing through the profit and loss account, nonetheless resulted in the posting of taxable revenue of FRF 38.5 billion (EUR 5.869 billion), pursuant to Article 38(2) of the General Tax Code. It follows that the tax concession stemming from the deduction of the unused provisions at the time they were created has effectively been neutralised.

…

It follows that, although the reclassification as capital of the provisions for renewal already used and included under the item ‘[G]rantor rights’ should, in any event, flow through the result for tax purposes, this was more than offset, in the same year, by the reincorporation of the unused provisions for renewal.

Since a comprehensive approach to the operations provides no evidence of an unjustified advantage, the accounting and fiscal reclassifications carried out in 1997 do not constitute aid in favour of EDF capable of unduly strengthening its competitive position.’

38. By letter of 6 May 2002, the Commission stated that certain information was still lacking, in spite of its previous requests, and it also requested clarifications concerning the latest information which had been presented to it.

39. By letter of 28 June 2002, the French authorities forwarded additional information and a meeting was held on 3 September 2002.

40. The Commission informed the French authorities that it had taken three related decisions concerning EDF, by means of a letter dated 16 October 2002, published in the Official Journal of the European Communities of 16 November 2002 (OJ 2002 C 280, p. 8) in the authentic language (French), preceded by a summary in the other official languages.

41. First, the Commission proposed to the French authorities, as an appropriate measure pursuant to Article 88(1) EC, that they should withdraw the unlimited State guarantee enjoyed by EDF on all its commitments by virtue of its public enterprise status, which precluded application of the legislation on the administration and compulsory liquidation of firms in difficulty. Second, the Commission initiated a formal investigation under Article 88(2) EC into the advantage resulting from the non-payment by EDF of the corporation tax due on some of the accounting provisions created free of tax for the renewal of the RAG (‘the decision initiating the procedure’). Finally, it instructed the French authorities to supply information it needed in order to examine that tax concession.

42. The French authorities submitted their comments to the Commission by letter of 11 December 2002, in which they disputed that EDF had received a tax concession in 1997.

43. A technical meeting attended by the Commission and the French authorities was held on 12 February 2003 concerning the tax concession allegedly received by EDF in 1997.

44. By letter of 12 June 2003, the French authorities sent the Commission their comments in the context of the formal investigation procedure.

45. On 17 November 2003, a further technical meeting was held between the Commission, the French authorities and representatives of EDF concerning the tax concession allegedly received by EDF in 1997. The French authorities provided additional information on that question by letter of 20 November 2003.

46. On 16 December 2003, the Commission adopted the Decision on aid measures in favour of EDF and the electricity and gas industries (C 68/2002, N 504/2003 and C 25/2003) (‘the contested decision’).

Contested decision

47. The contested decision is concerned, respectively, with an ‘unlimited guarantee’ arrangement provided by the French Republic to EDF, with certain aspects of the pension scheme for the electricity and gas industries and with the non-payment by EDF, in 1997, of corporation tax on some of the provisions created free of tax for the renewal of the RAG.

48. Article 3 of the contested decision provides:

‘The non-payment by EDF, in 1997, of corporation tax on some of the provisions created free of tax for the renewal of the RAG, corresponding to FRF 14.119 billion in grantor rights reclassified as capital injections, constitutes State aid that is incompatible with the common market.

The aid involved in the non-payment of corporation tax amounts to EUR 888.89 million.’

49. Article 4 of the contested decision provides:

‘France shall take all necessary measures to recover from EDF the aid referred to in Article 3 and unlawfully made available to it.

Recovery shall be effected without delay and in accordance with the procedures of national law provided that they allow the immediate and effective execution of the decision. The aid to be recovered shall include interest from the date on which it was at the disposal of EDF until the date of its recovery. Interest shall be calculated on the basis of the reference rate used for calculating the grant‑equivalent of regional aid, applied on a compound basis in accordance with the Commission communication on the interest rates to be applied when aid granted unlawfully is being recovered.’

50. With regard to the tax concession allegedly received by EDF in 1997, the Commission found as follows:

‘(84) Since Act No 97-1026… established that EDF was deemed to have been the owner of the high-voltage transmission network (RAG) since 1956, it has to be ascertained whether the Act did not involve a transfer of ownership of the RAG.

(85) According to the information provided by the French authorities, EDF can reasonably be regarded as the owner of the RAG since the initial contractual conditions dating from 1956. That conclusion is based on the following evidence: the features of the different types of concession contract under French law; the special features of the original concession granted to EDF, which did not include an explicit retrocession clause; the procedure for the acquisition of the assets concerned, for which EDF had to pay a fee similar to compensation under a compulsory purchase procedure; and the conditions for the financing, maintenance and extension of the RAG at EDF’s expense. The Commission consequently takes the view that the “clarification” of ownership of the RAG brought about by Act No 97-1026… does not in itself involve any State aid.

(86) It now has to be examined whether Act No 97-1026 addressed all the tax implications of such “clarification” and, if not, whether a tax concession was thus granted to EDF.

(87) During the period between 1987 and 1996, EDF created tax-free provisions for the renewal of the RAG. Following [Act No 97-1026] declaring that EDF was deemed to have been the owner of the RAG since 1956, those provisions became superfluous and therefore had to be reallocated to other items in the balance sheet.

(88) The letter from the Minister for Economic Affairs setting out the tax implications of the restructuring of EDF’s balance sheet shows that the unused provisions for renewal of the RAG were subjected by the French authorities to corporation tax at 41.66%, the rate applicable in 1997.

(89) On the other hand, pursuant to Article 4 of Act No 97-1026…, some of those provisions, namely the grantor rights, corresponding to renewal operations already carried out, were reclassified as capital injections amounting to FRF 14.119 billion without being subjected to corporation tax. The French authorities themselves acknowledge that the transaction was illegal. In a memorandum dated 9 April 2002 addressed by the Directorate-General for Taxation to the Commission, the French authorities Stated that “the grantor rights in respect of the RAG represent an unowed debt which was unjustifiably exempted from tax by being incorporated into the capital” and that “before this reserve was incorporated into the capital, it should have been transferred from the enterprise’s liabilities, where it was incorrectly posted, to a net assets account, thereby resulting in a positive variation in net worth that was taxable under Article 38(2)” of the General Tax Code. They noted that “the tax concession thus obtained [by EDF in 1997] can be estimated at FRF 5.88 billion (14.119 × 41.66%)”, equivalent to EUR 888.89 million.

(90) The Commission points out, on the one hand, that, in line with the [CNC] Opinion, corrections to accounting errors should be posted in the accounts for the financial year in which they are discovered. On the other hand, since the unused provisions amounting to FRF 38.5 billion that had been created free of tax were subjected to corporation tax at the rate of 41.66% in 1997, the Commission can see no objective reason why the rest of the provisions created free of tax should not have been taxed at the same rate.

(91) The Commission takes the view that the grantor rights should have been taxed at the same time and the same rate as the other accounting provisions created free of tax. This means that the FRF 14.119 billion in grantor rights should have been added to the FRF 38.5 billion in unused provisions and taxed at the rate of 41.66% applied by the French authorities to the restructuring of EDF’s balance sheet. By not paying all the corporation tax due when it restructured its balance sheet, EDF saved EUR 888.89 million.

(92) The Commission considers that the aid was indeed paid in 1997, since the FRF 14.119 billion was at that time a debt to the State, entered under the balance sheet item of grantor rights, which the State waived by means of Act No 97‑1026…

(93) The French authorities claim that, even if EDF had not set aside provisions for the renewal of the RAG, it would still not have been liable for payment of corporation tax between 1987 and 1996 because of the carryover of large tax losses. The Commission dismisses this argument as irrelevant, since the tax concession dated from 1997 and not previous years. It also notes that, if the provisions had not been set aside, the tax losses carried over would have been gradually absorbed between 1987 and 1996 and the amount of tax payable by EDF in 1997 would have been significantly higher.

(94) The French authorities also take the view that, even if the creation of provisions for the renewal of the RAG resulted in an advantage, that advantage should be regarded as cancelled out by the increase in corporation tax paid in 1997. The Commission cannot but dismiss this argument. As it has demonstrated above and as the French authorities themselves acknowledge in their memorandum dated 9 April 2002, although the unused replacement provisions were correctly taxed, the grantor rights were reclassified as capital injections without being subjected to corporation tax. The tax paid by EDF in 1997 is therefore lower than the tax normally due.

(95) The French authorities claim, furthermore, that the restructuring of EDF’s accounts in 1997 can be regarded as a capital injection of an amount equivalent to the partial tax exemption: it was therefore an investment by them and not an aid measure. They also argue that, over the period from 1987 to 1996, EDF paid more to the State overall than the corporation tax that would have been paid by a commercial enterprise which did not create provisions for the renewal of the RAG and which paid its shareholder a dividend equal to 37.5% of its net result after tax.

(96) The Commission has to dismiss these arguments, since the private investor principle can be applied only in the context of the pursuit of an economic activity, not in the context of the exercise of regulatory powers. A public authority cannot use as an argument any economic benefits it could derive as the owner of an enterprise in order to justify aid granted in a discretionary manner by virtue of the prerogatives it enjoys as the tax authority in relation to the same enterprise.

(97) While a Member State may act as a shareholder in addition to exercising its powers as a public authority, it must not combine its role as a State wielding public power with that of a shareholder. Allowing Member States to use their prerogatives as public authorities for the benefit of their investments in enterprises operating in markets that are open to competition would render the Community rules on State aid completely ineffective. Furthermore, while in accordance with Article 295 the Treaty is neutral as regards the system of capital ownership, the fact remains that public enterprises must be subject to the same rules as private enterprises. Public and private enterprises would no longer be granted equal treatment if the State were to use the prerogatives of public power for the benefit of the enterprises in which it is a shareholder.

(98) The French authorities claim that the rate of corporation tax that should have been applied when EDF’s balance sheet was restructured was the 1996 rate and not the 1997 rate. As stated earlier, the Commission would first point out that the [CNC] considers that corrections to accounting errors should be posted in the accounts for the financial year in which they are discovered. Since the provisions for renewal of the RAG became superfluous following Act No 97-1026…, they should have been reclassified in the accounts for the 1997 financial year and therefore taxed at the rate of corporation tax applicable to that year. The Commission also notes that the French authorities themselves applied the 1997 rate of corporation tax to the share of the provisions that was taxed.

(99) The non-payment by EDF, in 1997, of EUR 888.89 million in tax therefore constitutes an advantage for the group. EDF was able to use the amount of the unpaid tax to increase its capital and reserves without having to raise outside finance. The advantage is necessarily selective, since the non-payment of corporation tax on some of the accounting provisions constitutes an exception to the tax treatment normally applicable to such a transaction. The fact that the advantage was granted to EDF by a specific legislative instrument, Act No 97‑1026…, is proof that it is unique and overrides the rules of ordinary law.

…

(154) In the light of the foregoing considerations, the Commission accordingly takes the view that the aid under examination constitutes operating aid which has had the effect of strengthening EDF’s competitive position in relation to its competitors. It is therefore incompatible with the common market.

(155) Lastly, the Commission considers that, contrary to what is claimed by the French authorities, the rule on limitation periods does not apply in the case in point. Although EDF created the accounting provisions free of tax between 1987 and 1996, it should be pointed out, on the one hand, that corrections to accounting errors, which by their very nature relate to the posting of past transactions, should according to the [CNC] be posted in the accounts for the financial year in which they are discovered and, on the other hand, that the Act providing that the grantor rights were to be reclassified as capital injections without being subject to corporation tax dates from 10 November 1997. The tax concession therefore dates from 1997 and any new aid paid on that date is therefore not time-barred.’

51. In view of the interest calculated pursuant to Article 4 of the contested decision, the total amount which EDF has been asked to refund amounts to EUR 1.217 billion. EDF repaid that sum to the French State.

Procedure and forms of order sought by the parties

52. EDF brought the present action by application lodged at the Registry of the [General Court] on 27 April 2004.

53. By document lodged at the Registry of the [General Court] on 17 August 2004, the French Republic sought leave to intervene in support of the form of order sought by EDF. By order of 20 September 2004, the President of the Third Chamber of the [General Court] granted leave to intervene. The French Republic lodged its statement in intervention within the prescribed period.

54. By letter of 18 February 2005, the Commission requested that the [General Court] adopt a measure of organisation of the procedure with a view to having a report entitled ‘the Oxera Report’, annexed by EDF to its observations on the French Republic’s statement in intervention, removed from the case-file on the ground that it constituted new evidence which was inadmissible at that stage of the procedure.

55. By letter of 25 April 2005, EDF requested that the [General Court] adopt a measure of organisation of the procedure inviting the Commission to take a view on the content of that report. The Commission submitted its observations on that request by letter of 7 June 2005.

56. The [General Court] (Third Chamber) invited the parties to respond in writing to questions which were notified to them by the Registry on 12 June 2006. The parties complied with that request within the prescribed period.

57. By document lodged at the Registry of the [General Court] on 3 March 2008, Iberdrola SA sought leave to intervene in this case in support of the form of order sought by the Commission.

58. Since the application to intervene was made after the expiry of the period of six weeks referred to in Article 115(1) of the Rules of Procedure of the [General Court], by order of 5 June 2008, Iberdrola was granted leave to intervene in support of the form of order sought by the Commission and to submit its observations during the oral procedure.

59. The [General Court] (Third Chamber) invited the parties to respond in writing to further questions which were notified to them by the Registry on 14 May 2008. The parties complied with that request within the prescribed period.

60. The parties put oral arguments and gave their answers to the questions put by the [General Court] at the hearing of 25 November 2008.

61. EDF, supported by the French Republic, requests that the General Court should:

– annul Articles 3 and 4 of the contested decision;

– order the Commission to pay the costs.

62. The Commission, supported by Iberdrola, contends that the General Court should:

– dismiss the application as unfounded;

– order EDF to pay the costs.

63. In its observations on the statement in intervention of the French Republic, the Commission also requested that the General Court should order the French Republic to pay the costs.

Law

64. EDF essentially raises three pleas in law.

65. By its first plea, on the one hand, EDF claims that the Commission misinterpreted the provisions of Article 20 of Regulation No 659/1999 by not allowing it to submit relevant observations on the ‘reversal of analysis’ which occurred between the decision initiating the procedure and the contested decision.

66. On the other hand, EDF submits that the fact that it was not informed, in the course of the procedure, of a ‘fundamental change of analysis’ constitutes an infringement of its ‘right to be heard’.

67. By its second plea, EDF claims, essentially, that the Commission made several errors in law when interpreting the concept of ‘State aid’ and also that there are several lacunae in the statement of reasons for the contested decision.

68. First, the ‘under-compensation’ in respect of the public service costs borne by EDF, which increased very substantially from 1997, offset any ‘hypothetical advantage’ which it might have received.

69. Secondly, the measures at issue should have been classified as a capital injection and analysed in an overall context of clarifying the financial relationship between the State and EDF. By implementing those measures, the State acted like a prudent private investor in a market economy.

70. Thirdly, the Commission should have taken into account the overall context of the restructuring of financial relations between the State and EDF in 1997, in order to reach the conclusion that no overall advantage was granted to EDF.

71. Fourthly, the measures at issue did not affect trade between Member States.

72. By its third plea, EDF argues that the Commission infringed the obligation to state reasons by failing to provide reasons for its decision to reject the argument classifying the measures at issue as a recapitalisation operation.

73. EDF also submits that the Commission misinterpreted fiscal aspects of the operation carried out in 1997.

74. EDF also raises two pleas in the alternative.

75. By its first plea put forward in the alternative, EDF claims that the measures at issue – if they may be classified as aid – must, for the most part, be regarded as existing aid, pursuant to Article 1(b)(v) of Regulation No 659/1999, in that they were implemented before the effective liberalisation of the electricity sector. Moreover, the majority of them should be regarded as existing aid within the meaning of Article 15(1) of Regulation No 659/1999, relating to limitation periods.

76. By its second plea put forward in the alternative, EDF submits that, in any event, the contested decision contains several calculation errors which render it invalid.

77. The French Republic intervenes in support, first, of the part of the second plea which is concerned with the non-application by the Commission of the private investor test, secondly, of the third plea, alleging infringement of the obligation to state reasons and, thirdly, of the pleas put forward in the alternative by EDF.

The first plea, alleging, first, infringement of Article 20 of Regulation No 659/1999 and, second, infringement of the right to be heard

Arguments of the parties

78. In the context of the first part of its second plea, EDF submits that, in the contested decision, the Commission adopted a radically different position to that which it had taken in the decision initiating the procedure with regard, in particular, to the classification of the measures at issue.

79. EDF submits that, in terms of the decision initiating the procedure, the alleged aid stems from the creation of provisions for the renewal of the RAG during the period from 1987 to 1996, those provisions being supposed to have granted EDF an undue tax concession each year during that period, which was partially offset by the accounting adjustments and reclassifications carried out in 1997. EDF refers, in that regard, to paragraphs 45, 49, 52, 56 and 84 of the decision initiating the procedure.

80. EDF takes the view that it clearly follows from paragraphs 45 and 49 of the decision initiating the procedure that the provisions of Law No 97-1026 are analysed by the Commission as having reduced the advantages previously obtained and not as having constituted those advantages.

81. It also considers that it is only by having recourse to the concept of ‘consolidation of the preceding aid’ – a concept which is, moreover, without precedent and extraneous to Regulation No 659/1999 – that the Commission has seemed to seek artificially to link solely to 1997 the alleged advantages, which it also argued had been obtained during the 1987-1996 period. EDF makes particular reference, in that regard, to paragraph 71 of the decision initiating the procedure.

82. EDF submits that, in the contested decision the Commission changed its position, by taking the view that the provisions of Law No 97-1026, which it had until then presented as having reduced the amount of the advantages obtained by it, actually constituted the alleged aid. EDF relies, in that regard, on the wording of Article 3 of the contested decision.

83. EDF further considers that that change of analysis had an influence on the classification as new aid of the measures at issue and on the refusal to take into consideration the fact that they were, if anything, existing aid.

84. EDF submits that, once the decision to initiate the investigation procedure has been made, the Commission is required to give the State and any interested third parties the opportunity to submit their comments.

85. EDF acknowledges that, as the case-law presently stands – it refers in that regard to Case T-613/97 UFEX and Others v Commission [2000] ECR II-4055 – the purpose of that stage of the procedure is not so much to safeguard their ‘right to be heard’, as to allow the Commission to gather information relevant to its analysis.

86. EDF points out that recital 8 in the preamble to Regulation No 659/1999 none the less states that ‘in all cases where, as a result of the preliminary examination, the Commission cannot find that the aid is compatible with the common market, the formal investigation procedure should be opened in order to enable the Commission to gather all the information it needs to assess the compatibility of the aid and to allow the interested parties to submit their comments; whereas the rights of the interested parties can best be safeguarded within the framework of the formal investigation procedure provided for under Article [88](2) [EC].’

87. Relying in particular on the last sentence of that recital, EDF takes the view that interested third parties have rights which the formal investigation procedure is intended to safeguard. Those rights consist in the opportunity to provide the Commission with all the information enabling it properly to carry out its analysis.

88. Consequently, in so far as the decision initiating a formal procedure is liable to affect the legal situation of the recipient of the aid and adversely to affect him (Joined Cases T-195/01 and T-207/01 Government of Gibraltar v Commission [2002] ECR II-2309, paragraph 85), EDF should, throughout the administrative procedure, have been placed in a position in which it could effectively make known its view of the reality and relevance of the facts and the complaints and circumstances alleged by the Commission (see, in that regard, Case C‑135/92 Fiskano v Commission [1994] ECR I‑2885, paragraph 40, and Case T‑65/96 Kish Glass v Commission [2000] ECR II‑1885, paragraph 32), particularly since the amount of the sums at stake was considerable and there was only a single recipient concerned.

89. EDF claims that, since the Commission failed to inform the interested third parties of the ‘fundamental change’ in its analysis, EDF was not in a position to appreciate the scale of the financial impact of the contested decision or to provide the Commission with the information required for a proper understanding of the situation.

90. According to EDF, since the rights of interested third parties are limited, it is necessary to ensure that observance of those rights is ‘particularly rigorous’ and, accordingly, that the sole right conferred on interested third parties – which is the ability to communicate relevant documents and information to the Commission – may, at the very least, be exercised with full knowledge of the analysis conducted by the Commission, since that right would otherwise be rendered meaningless.

91. According to EDF, that was not the case in this instance, since it was not informed of the Commission’s change of analysis and was therefore unable to provide relevant information and evidence which might, for example, have led the Commission not to abandon its initial analysis, which could have resulted in most of the measures in question being categorised as existing aid.

92. Accordingly, the Commission infringed Article 20 of Regulation No 659/1999.

93. In the second part of its first plea, EDF invites the General Court to consider the ‘rigour of the present case-law’ on the ‘right to be heard of interested third parties’ – in particular that of the recipient of the alleged aid – in the context of State aid procedures.

94. EDF points out that, in Case C‑142/87 Belgium v France [1990] ECR I‑959 ( Tubemeuse ), the Court of Justice held that observance of the right to be heard is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of specific rules (paragraph 46 of the judgment).

95. In the field of State aid, ‘an actual right to be heard’ for the purpose of that judgment may be conferred solely on the Member States, since the procedure is initiated against them and not against third-party recipients.

96. According to EDF, such an approach is, in essence, difficult to reconcile with the fact that it is the third-party recipients who are addressed by a repayment order, the Member State being, by contrast, the financial beneficiary of such an order. A ‘conflict of interests’, between the Member States and the recipient is therefore possible.

97. EDF submits, in essence, that that ‘potential conflict of interests’ situation, on the one hand, highlights the need to safeguard the few rights conferred on interested third parties in the context of State aid proceedings – and, in particular, the right conferred on them by Article 20 of Regulation No 659/1999 – and, on the other hand, justifies, quite apart from that provision, conferring on interested third parties or, at the very least, on recipients of the aid, the ‘rudiments of an actual right to be heard’.

98. EDF considers, in that regard, that observance of the rights of interested third parties in general and of the rights of the recipient of the aid in particular requires the Commission to allow them to make known their views in an effective manner and, therefore, requires it to publish a new notice if it plans in its final decision to put forward facts, complaints, analyses or circumstances which differ substantially from those set out in the notice which was sent to those third parties.

99. In this case, the fact that the Commission ‘fundamentally’ changed its analysis of the nature of the measures at issue in its final decision and did not publish a second notice in the Official Journal constitutes, according to EDF, a serious infringement of its ‘right to be heard’.

100. The Commission disputes that line of argument.

Findings of the Court

– Infringement of the right to be heard

101. It must be borne in mind that, according to settled case-law, respect for the right to be heard is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of specific rules. That principle requires that the undertaking concerned be afforded the opportunity during the administrative procedure to make known in an effective manner its views on the truth and relevance of the facts and circumstances relied on and on the documents used by the Commission to support its claim that there has been an infringement of Community law (Case 40/85 Belgium v Commission [1986] ECR 2321, paragraph 28, and Joined Cases T-228/99 and T-233/99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission [2003] ECR II-435, paragraph 121).

102. However, the administrative procedure relating to State aid is initiated solely against the Member State concerned. The undertakings receiving aid are regarded solely as ‘interested parties’ in that procedure. They cannot themselves seek to engage in an adversarial debate with the Commission in the same way as is offered to the abovementioned Member State (Joined Cases C‑74/00 P and C‑75/00 P Falck and Acciaierie di Bolzano v Commission [2002] ECR I‑7869, paragraphs 81 and 83).

103. Accordingly, the case-law confers on the parties concerned essentially the role of information sources for the Commission in the administrative procedure instituted under Article 88(2) EC. It follows that, far from enjoying the same rights to a fair hearing as those which individuals against whom a procedure has been instituted are recognised as having, interested parties have only the right to be involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case (see Joined Cases T-371/94 and T-394/94 British Airways and Others v Commission [1998] ECR II-2405, paragraphs 59 and 60, and the case-law cited, and Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission , cited in paragraph 101 above, paragraph 125).

104. The inevitable conclusion is therefore that the applicant cannot claim an infringement of his right to be heard, since no such right is conferred on him in the context of the administrative procedure, even though he is right in submitting that the Member State which granted the aid and the recipient thereof may have diverging interests in the context of procedures conducted by the Commission relating to State aid.

105. The first part of the first plea must therefore be dismissed.

– The infringement of the procedural rights of the recipient of the aid as an interested party

106. It is settled case-law that, during the investigation phase under Article 88(2) EC, the Commission has a duty to put the interested parties on formal notice to put forward their comments (see judgment of 8 May 2008 in Case C‑49/05 P Ferriere Nord v Commission , not published in the ECR, paragraph 68, and the case-law cited).

107. Although those interested parties do not enjoy the rights to a fair hearing, they nevertheless have the right to be involved in the administrative procedure conducted by the Commission to the extent appropriate in the light of the circumstances of the case ( Ferriere Nord v Commission , cited in paragraph 106 above, paragraph 69).

108. Furthermore, the Commission must initiate a formal investigation procedure, informing the interested parties, when, following a preliminary investigation, it has serious doubts as to the compatibility of the financial measure in question with the common market. It follows that, in its notice of intention to initiate that procedure, the Commission cannot be required to present a complete analysis on the aid in question, but it is sufficient for it to define sufficiently the framework of its investigation so as not to render meaningless the right of interested parties to put forward their comments (Case T-354/99 Kuwait Petroleum (Nederland) v Commission [2006] ECR II-1475, paragraph 85).

109. It should also be remembered that, according to Article 6(1) of Regulation No 659/1999, where the Commission decides to initiate the formal investigation procedure, it is permissible for its decision merely to summarise the relevant issues of fact and law, include a preliminary assessment as to the aid character of the State measure in question and set out its doubts as to the measure’s compatibility with the common market (Joined Cases T-269/99, T-271/99 and T‑272/99 Diputación Foral de Guipúzcoa and Others v Commission [2002] ECR II‑4217, paragraph 104).

110. Thus, a decision to initiate the procedure must give interested parties the opportunity effectively to participate in the formal investigation procedure, during which they will have the opportunity to put forward their arguments. For that purpose, it is sufficient for the parties concerned to be aware of the reasoning which has led the Commission to conclude provisionally that the measure in issue might constitute new aid incompatible with the common market (Joined Cases T‑309/04, T-317/04, T-329/04 and T-336/04 TV 2/Danmark and Others v Commission [2008] ECR II-2935, paragraph 139, and the case-law cited).

111. It must be pointed out that, in this case, both in the decision initiating the procedure and in the contested decision, the Commission examined the treatment for tax purposes of the grantor rights when EDF’s balance sheet was restructured by Law No 97-1026 (‘the contested measure’) and that, therefore, in that regard, the framework of the investigation is the same in the two decisions.

112. Furthermore, both in paragraph 51 of the decision initiating the procedure and in recital 89 in the preamble to the contested decision, the Commission used the calculation of the tax owed as presented by the French authorities, according to which calculation the tax relief received by EDF could be estimated at FRF 5 883 billion.

113. Accordingly, as a result of the decision initiating the procedure, EDF must be regarded as being sufficiently aware of the relevant framework of the investigation and of the reasoning which led the Commission to conclude provisionally that the contested measure might constitute aid incompatible with the common market to be able effectively to submit its comments in that regard.

114. Therefore, even if they were well founded, the arguments put forward by EDF that the Commission conducted, from a tax and accounting standpoint, an analysis of the contested measure which differs from that provisionally used in the decision initiating the procedure must be dismissed as irrelevant.

115. It is therefore necessary to dismiss the first plea raised by EDF.

The second plea, alleging infringement by the Commission of Article 87 EC

The first part, alleging failure to take account of ‘under compensation’ for the public service costs borne by EDF

– Arguments of the parties

116. EDF submits, essentially, that the public service obligations imposed on the undertaking by the public authorities have increased very substantially since 1997. However, those additional costs have not been recouped through electricity prices, since the latter have fallen very significantly during the same period.

117. EDF argues, in essence, that the increase in the costs of the public service stemming from the restructuring of the relationship between it and the State formed part of the financial balance which was set out in the management contract of 8 April 1997 (see paragraph 31 above).

118. In order to substantiate that claim, EDF relies on its public service obligation to purchase electricity for the benefit of producers who have established cogeneration facilities, the most significant obligation during the relevant period.

119. According to EDF, that single obligation is sufficient to establish that the corresponding costs clearly exceed any tax concession which it may have received.

120. EDF claims that, in Decision C (2003) 2508 of 23 July 2003 raising no objections to the capital increase of La Poste SA/NV by the Belgian State, the Commission considered, with regard to the public service obligation incumbent on La Poste, that since the ‘historical under-compensation’ for the additional net cost of the activities constituting services of general economic interest exceeded the capital contribution notified by the State, that increase did not in itself constitute State aid, as it conferred no advantage on La Poste, or constituted State aid compatible with the common market. The Commission therefore took the view that, in so far as the notified capital contribution was thus compatible with the common market, it was not necessary for it to analyse whether the State’s decision to contribute the capital in question represented the actions of a prudent private investor in a market economy.

121. EDF therefore takes the view that it is necessary to consider, by analogy with that decision by the Commission, that the capital contribution to EDF does not in itself constitute State aid, since it confers no advantage, or constitutes State aid compatible with the common market.

122. Moreover, EDF submits, essentially, that the Commission was careful to reject, in paragraph 79 of the decision initiating the procedure, the argument concerning the possible ‘under-compensation’ in respect of public service costs, but that it did so by relying on all the aid examined, including that whose classification as aid was ultimately rejected.

123. EDF also submits, in essence, that if the French Republic were to be regarded as having failed to communicate to the Commission the information requested by the latter concerning possible public service costs during the formal investigation procedure and if, in consequence, the arguments which were put forward in the context of this action cannot be taken into consideration, since the legality of a State aid decision must be assessed on the basis of the information available to the Commission at the time when that decision was adopted and since the complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when the assessments were made, this would have the effect that, having not been involved in the administrative procedure, EDF would be denied the right to rely on that part of its plea. However, that would confirm that its ‘right to be heard’ had been infringed, since, by not being informed ‘sincerely and completely’ by the Commission during the administrative procedure, it was not given the opportunity to evaluate the need to put forward that line of argument and is now prevented from doing so.

124. The Commission disputes that line of argument.

– Findings of the Court

125. It must be borne in mind that, according to settled case-law, in an action for annulment, the legality of a Community measure must be assessed on the basis of the information existing at the time when the measure was adopted. In particular, the complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when the assessments were made (see Case T‑217/02 Ter Lembeek v Commission [2006] ECR II-4483, paragraph 82, and the case-law cited).

126. In this respect, it cannot be complained that the Commission failed to take into account information which could have been submitted to it during the administrative procedure but which was not, since it is under no obligation to consider, of its own motion and on the basis of prediction, what information might have been submitted to it ( Ter Lembeek v Commission , cited in paragraph 125 above, paragraph 83).

127. Having regard to the wording of paragraph 79 of the decision initiating the procedure and to recital 153 in the preamble to the contested decision, as well as the footnote to that recital, it must be concluded that the Commission is correct to argue that it could not and was not required to examine possible public service costs in the absence of information on that matter from the French authorities and the interested parties and that it could not take into account, at the time of adopting the contested decision, information which it was made aware of only in the context of this action.

128. As regards the argument concerning the infringement of the right to be heard put forward by EDF, it must be rejected since, although they had been invited to submit information on that matter in the context of the administrative procedure, the French Republic and EDF considered that it was not necessary to do so. EDF cannot therefore argue, in the context of its action before the General Court, that it was not given the opportunity to assess the need to put forward a line of argument on that subject and that its right to be heard would be infringed if, now, those arguments were not examined in that regard.

129. It must be pointed out that any differences in analysis between the decision initiating the procedure and the contested decision are not such as to influence that assessment, in so far as the Commission had indicated in the decision initiating the procedure that it considered that the treatment to be given to the accounting provisions for the renewal of the RAG were capable of constituting new aid. It was therefore incumbent on the French Republic and on EDF to draw the procedural conclusions that such an analysis was likely to have for them and to provide the information necessary to defend their position, which they failed to do.

130. As regards the argument that the Commission nevertheless addressed that question in paragraph 79 of the decision initiating the procedure, but confined itself to pointing out that ‘the aid examined … conferred on EDF an operational advantage which seems at this stage to exceed the costs of any public service’, the sentence from which EDF cited extracts must be placed in its proper context:

‘EDF’s activities include those of a public-service provider. It should be noted that although, until now, they have not relied in that connection on the application of Article 86(2) [EC], the French authorities have pointed out that EDF is entrusted with public-service tasks. The authorities have not, however, provided any assessment of the cost incurred by EDF as a result of those obligations. It is therefore impossible to ascertain whether the various forms of State aid received by that operator correspond to the costs of the public-service tasks imposed on it. It seems, in any event, that the aid examined in this case, which essentially takes the form of exceptional derogations from the provisions normally applicable in the accounting and commercial field, conferred on EDF an operational advantage which seems at this stage to exceed the costs of any public service. EDF has not received capital injections for a considerable period. The aid examined in fact contributed to financing the aggressive expansion of EDF through the acquisition of shareholdings abroad. Such a use of those funds seems to fall outside the framework of what can be regarded as an acceptable public-service task.’

131. This was therefore merely a provisional assessment and an invitation, addressed to the French Republic and to EDF, to provide any information necessary to rebut that initial analysis. Accordingly, it cannot be used by the applicant as the basis of an argument.

132. Similarly, the Commission cannot be criticised for the fact that paragraph 79 of the decision initiating the procedure relates to all the aid examined by it and not solely to the aid which it ultimately declared incompatible with the common market when ordering its recovery in Articles 3 and 4 of the contested decision, that is to say the contested measure.

133. The first part of the second plea must therefore be dismissed.

The second part, alleging the absence of any effect on trade between Member States

– Arguments of the parties

134. EDF submits that the contested measure has not affected trade between Member States within the meaning of Article 87(1) EC, in so far as, on the one hand, in the light of Community case-law, the concept of ‘trade’ should be interpreted as being ‘synonymous’ with the concept of ‘competition’ and, on the other hand, trade between traditional national producers, enjoying a monopoly position in their respective countries at the time, cannot be treated in the same way as a competitive situation.

135. EDF claims that the General Court has clearly linked the concept of ‘trade between Member States’ to the concept of ‘competition’ and notes, in that regard, that the General Court has held that, concerning State aid, the conditions under which trade between Member States is effected and competition is distorted are as a general rule inextricably linked (Joined Cases T‑298/97, T-312/97, T‑313/97, T‑315/97, T-600/97 to T‑607/97, T-1/98, T‑3/98 to T‑6/98 and T-23/98 Alzetta and Others v Commission [2000] ECR II‑2319, paragraph 81, and Case T‑288/97 Regione Autonoma Friuli-Venezia Giulia v Commission [2001] ECR II‑1169, paragraph 44).

136. EDF argues that that analysis was confirmed by the Court of Justice in Case C‑159/94 Commission v France [1997] ECR I‑5815, in which the Court of Justice rejected the Commission’s argument that the abolition of the exclusive import and export rights of EDF and of Gaz de France (GDF) would foster the development of trade in the interests of the European Community and held that the Commission was required to define beforehand the Community interest in relation to which the development of trade must be assessed. EDF takes the view that the Court of Justice therefore clearly linked the concept of ‘distortions of competition’ and the concept of ‘trade between Member States’.

137. EDF submits that, although in the contested decision the Commission refers at length to the trade which could have taken place between the electricity operators having, for the most part, monopolies in the Member States prior to the liberalisation of that sector, it is nonetheless clear that there was no ‘genuine situation of competition’ prior to that liberalisation, which was gradually implemented only following the transposition of Directive 96/92.

138. With particular regard to France during the relevant period (1986-1997), EDF submits that the electricity sector was clearly closed to competition. Although several directives were adopted during that period [Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids (OJ 1990 L 313, p. 30) and Directive 96/92], their transposition in several Member States nevertheless took some time, ‘because of the complex initial situation and the disparity between electricity structures within the Community’, as was recognised by K. Van Miert, the member of the Commission responsible for competition at that time.

139. EDF therefore considers that it cannot be claimed that a ‘genuine situation of competition’ existed in France or, indeed, in almost any European country, during the years 1987 to 1996.

140. EDF points out, in that regard, that many of the examples provided by the Commission in the contested decision for the purpose of concluding that there was trade between the Member States having an effect on competition relate to periods after 1997: that applies in particular to the acquisition of a third of the capital of the German undertaking EnBW Energie Baden-Württemberg AG and of the production and distribution capacity of London Electricity, to the takeover of the undertaking Fenice, to the creation of a partnership with Fiat to purchase Montedison and to a partnership with Véolia Environnement through the company Dalkia.

141. In conclusion, EDF considers that, although between 1987 and 1996 it had engaged in trade with other European national producers, linked primarily to long‑term contracts which often allowed those operators to dispense with investments in production, since the large majority of EDF’s ‘counterparts’ enjoyed a monopoly position in their respective countries, that trade in no way affected competition at the intra-Community level.

142. The Commission disputes that line of argument.

– Findings of the Court

143. Article 87(1) EC prohibits aid which affects trade between Member States and distorts or threatens to distort competition.

144. For the purpose of categorising a national measure as State aid, it is necessary, not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition (Case C‑222/04 Cassa di Risparmio di Firenze and Others [2006] ECR I‑289, paragraph 140, and the case‑law cited).

145. Moreover, if the Commission has correctly explained how the aid in question was capable of having such effects, it is not required to carry out an economic analysis of the actual situation on the relevant market, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings and of the trade flows in question between Member States (see, in that regard, Case T‑55/99 CETM v Commission [2000] ECR II-3207, paragraph 102, and the judgment of 6 September 2006 in Joined Cases T‑304/04 and T-316/04 Italy and Wam v Commission , not published in the ECR, paragraph 64).

146. When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid (see Cassa di Risparmio di Firenze and Others , cited in paragraph 144 above, paragraph 141, and the case-law cited).

147. In that regard, the fact that an economic sector has been liberalised at Community level may serve to determine that the aid has a real or potential effect on competition and affects trade between Member States (see Cassa di Risparmio di Firenze and Others , cited in paragraph 144 above, paragraph 142, and the case‑law cited).

148. In addition, it is not necessary that the beneficiary undertaking itself be involved in intra-Community trade. Aid granted by a Member State to an undertaking may help to maintain or increase domestic activity, with the result that undertakings established in other Member States have less chance of penetrating the market of the Member State concerned. Furthermore, the strengthening of an undertaking which, until then, was not involved in intra-Community trade may place that undertaking in a position which enables it to penetrate the market of another Member State (see Cassa di Risparmio di Firenze and Others , cited in paragraph 144 above, paragraph 143, and the case-law cited).

149. In this case, it should be noted that the Commission pointed out, in recitals 104 to 112 and 114 and 115 in the preamble to the contested decision, that there was, irrespective even of the directives intended to liberalise the electricity sector, a degree of competition in that sector, at least on certain markets, whether on the specific markets on which EDF operated at the material time or, in some Member States, on other markets not yet entirely open to competition

150. Those factors are not disputed by EDF.

151. Nor has EDF disputed that it exported electricity to other Member States whose electricity markets had already been opened up.

152. The fact that the French internal market, or at least a part of it, was closed to competition is therefore irrelevant, assuming that it is proven.

153. In consequence, it is necessary to conclude that the Commission cannot be criticised for failing better to establish that it was possible that the contested measure could have affected intra-Community trade.

154. Accordingly, EDF’s line of argument on that matter cannot succeed.

155. In conclusion, the second part of the second plea must therefore be dismissed.

The third part of the second plea, based on, first, the classification of the measures at issue as a capital injection, and, secondly, the State’s conduct as a prudent private investor in a market economy when it implemented them

– Arguments of the parties

156. EDF points out that in 1997 the State was its sole shareholder. At that time, EDF was ‘significantly under-capitalised’ and its balance sheet was ‘manifestly unbalanced’. Its own capital was FRF 24.2 billion, it had debt from borrowings amounting to FRF 131.9 billion (that is a net debt/own capital ratio of 480%) and net assets of FRF 696.4 billion.

157. EDF submits that the State therefore sought to strengthen the own capital of the public undertaking and to change the financial balance between the State and the undertaking, with a view to approximating the position of the undertaking with that of its major competitors in the European electricity sector, in order to allow it to prepare itself for the ‘upheaval in its economic and regulatory environment’. Accordingly, the State acted as would a prudent private investor, that concept having to be interpreted, according to EDF, in the light of the very specific characteristics of the economic sector in which the undertaking operates.

158. EDF argues that, in that context, it was decided in 1997 to clarify the legal and financial regime applicable to the RAG, by bringing to an end its characteristic ‘ambiguities’ and, at the same time, its specific accounting treatment, which had been criticised by the French Cour des Comptes, and simultaneously to restructure EDF’s balance sheet.

159. That two-fold objective of clarifying the legal and financial regime applicable to the RAG, with the resulting effects on its accounts, and of restructuring EDF’s balance sheet was set out in the management contract of 8 April 1997 (see paragraph 31 above) and was presented ‘without any ambiguity’ in the context of the travaux préparatoires for Law No 97-1026.

160. EDF, supported by the French Republic, argues, in essence, that the reclassification of the grantor rights arising from Law No 97-1026 constitutes a capital injection, and points out that the French Republic consistently maintained that position during the administrative procedure, but that the Commission rejected that line of argument without examining its substance, on the two grounds set out in recitals 96 and 97 in the preamble to the contested decision.

161. According to EDF, the Commission thus displays a ‘clear lack of understanding’ of the economic nature of the recapitalisation operation. It therefore misinterpreted the concept of ‘State aid’ and infringed Article 87 EC.

162. EDF argues, in essence, that the recapitalisation operation – carried out by means of the allocation of the grantor rights directly from the liabilities item entitled ‘Value in kind of assets operated under concession’ to the liabilities item entitled ‘Capital injections’ in the amount of FRF 14.119 billion as at 31 December 1996 – was implemented by ‘neutral means’ from an economic and tax standpoint and by the ‘most natural manner in this case’, that is to say the legislative process, making use, in the interests of effectiveness, of the same law as that by which EDF was deemed to have owned the RAG.

163. EDF points out that those accounting adjustments, by their very nature, actually required legislative intervention. The capital injection of the value of the assets in kind allocated under concession actually fell within the scope of legislation, since EDF’s capital was laid down by Article 16 of Law No 46-628, which provides that it ‘belongs to the nation’, that ‘it is inalienable’ and that, ‘in the event of operating losses, it must be reconstituted from the results of subsequent years’. According to Article 1 of Decree No 56-493 of 14 May 1956 concerning the capital injections provided to EDF and to GDF (JORF, 19 May 1956, p. 4613), they were subject to the same rules as those which are laid down by Article 16 of Law No 46-628.

164. EDF, supported by the French Republic, states – and they have confirmed this in their responses to the written questions addressed to them by the General Court – that the State had the choice between two approaches (called ‘short plan’ and ‘long plan’ by EDF) leading to exactly equivalent results: that is either to make a further capital injection by immediately reclassifying, by law, part of the tax-free accounting provisions for the renewal of the RAG, or, first of all, to allocate to EDF’s capital a net amount after corporation tax, request EDF to pay a tax corresponding to the variation in net worth and to make a further capital injection of an amount equal to the tax paid.

165. According to EDF, the State took the view that the first approach was ‘economically logical and financially just as neutral’ as the second and that that approach had, furthermore, been approved by the French Cour des Comptes.

166. It follows clearly from the line of argument put forward by the Commission that if the State had taken the second approach when injecting the capital, the Commission would have applied the prudent private investor test. That shows, in EDF’s view, that it was only the means chosen by the State to make the capital increase which led the Commission to reject, on principle, the application of the private investor test.

167. EDF argues that it is clear from recital 96 in the preamble to the contested decision and from the Commission’s pleadings that it is the choice of means used to make the capital increase which the Commission criticises. Such a line of argument, it submits, is ‘purely formulistic and wholly irrelevant’.

168. According to EDF, the statement in the contested decision that the Commission ‘has to dismiss these arguments [relating to the recapitalisation]’ on the ground that the private investor test ‘can be applied only in the context of the pursuit of an economic activity, not in the context of the exercise of regulatory powers’ constitutes, first, an interference in procedures of internal law, which are outside the scope of Community law, and entails, secondly, a formalism which is extraneous to competition law.

169. It is true that EDF recognises that the State, in order to make the capital increase, employed means which were not available to companies under ordinary law, namely the reclassification of the grantor rights by means of legislation. However, it did not act in the context of its regulatory powers or its prerogatives as a public authority.

170. First of all, to take the contrary view would be to disregard the fact that EDF’s memorandum and articles of association and the definition of its capital are themselves laid down by legislation.

171. EDF states, in essence, that the State is required to use legislation to carry out that operation, in view of the particular nature of the undertaking. It takes the view that, since legislation was necessary for EDF to be deemed to be the ab initio owner of the RAG, there is no reason why the legislature should refrain from ‘pursuing to its conclusion the logic’ set out in the management contract of 8 April 1997 (see paragraph 31 above) in restructuring the undertaking’s balance sheet by amending Article 16 of Law No 46-628.

172. Secondly, EDF claims, in essence, that, in so doing, the State in fact acted as ‘prudent shareholder’ in the undertaking, under normal market conditions, which must necessarily be assessed by reference to the objective and verifiable elements which are available (Joined Cases C‑83/01 P, C‑93/01 P and C‑94/01 P Chronopost and Others v Ufex and Others [2003] ECR I‑6993, paragraph 38).

173. Thirdly, EDF submits that, by automatically denying the French State the right to recapitalise a public undertaking by the means which it regards as most appropriate, the Commission also errs in law, infringing Article 295 EC which enshrines ‘the neutrality of Community law as regards the Member States’ rules governing the system of property ownership’.

174. Fourthly, EDF takes the view that, even if another means had been chosen, there is nothing to justify the excessive formalism displayed by the Commission, which rejected, without even discussing, the argument concerning the recapitalisation of the undertaking, on the sole ground that the means by which it was implemented qualified the State’s intervention as State aid ‘as a matter of principle’. EDF argues that, on the contrary, the immateriality of the form which a measure may take to its possible classification as State aid lies at the heart of the Community case-law.

175. EDF claims, essentially, that for the purpose of classifying a measure as State aid, the case-law attaches no importance to the form which it may take or to the State authority which adopts it, since those considerations are immaterial to the analysis carried out under Article 87(1) EC.

176. Moreover, EDF argues that, according to the Commission itself, when analysing the compatibility of aid with the common market, the Commission ‘examines the compatibility of aid not in terms of the form which it may take, but in terms of its effect’ [paragraph 7 of the Commission notice on the application of the State aid rules to measures relating to direct business taxation (OJ 1998 C 384, p. 3)]. Accordingly, the Commission should not have rejected, without examining, the argument that the operation was a recapitalisation, solely on the basis of a purely formal consideration, namely the means used to carry out that recapitalisation.

177. EDF takes the view that, if the form in which a measure is implemented is irrelevant as regards its classification as State aid, that form may no longer be relied on by the Commission as an argument – and, in particular, as the sole argument – for rejecting the reasoning challenging that classification as State aid.

178. Fifthly, EDF points out that the Commission has already taken the view in a number of cases that a capital contribution may take various forms: the subscription to an undertaking’s bonds [Commission Decision 94/662/EC of 27 July 1994 concerning the subscription by CDC participations to bonds issued by Air France (OJ 1994 L 258, p. 26)], the writing-off of a debt used to make a capital injection [Commission Decision 89/58/EEC of 13 July 1988 concerning aid provided by the United Kingdom Government to the Rover Group, an undertaking producing motor vehicles (OJ 1989 L 25, p. 92)], the conversion of loans into equity capital [Commission Decision 90/224/EEC of 24 May 1989 on aid granted by the Italian Government to Aluminia and Comsal, two State-owned undertakings in the aluminium industry (OJ 1990 L 118, p. 42)], the conversion of debts to equity, regarded as equivalent to an injection of capital of the same amount [Commission Decision 94/696/EC of 7 October 1994 on the aid granted by Greece to Olympic Airways (OJ 1994 L 273, p. 22)], the ‘cancellation’ of provisions created to cover future pension expenditure and their transfer to a revaluation reserve [Decision C (2003) 2508 (see paragraph 120 above)].

179. Moreover, according to EDF, the Commission has already applied the private investor in a market economy test to a measure implemented by legislation and therefore to a measure arising from the exercise of State prerogatives, as in the Siciliana Acque Minerali Case [Commission Decision 2000/648/EC of 21 June 2000 on State aid which Italy is planning to implement for Siciliana Acque Minerali Srl (OJ 2000 L 272, p. 36)].

180. To conclude in that regard, the fact that a capital injection has been implemented by legislation is not capable of preventing the application of the private investor test to that measure.

181. According to EDF, the Commission was therefore obliged to examine whether the measures adopted following Law No 97-1026 constituted, as the French State submits, ‘a lawful capital increase in terms of its procedure and amount’.

182. Moreover, EDF points out that, according to the Court, in order to determine whether a State measure constitutes State aid, it is necessary to establish whether the recipient undertaking receives an economic advantage which it would not have obtained under normal market conditions ( Chronopost and Others v Ufex and Others , cited in paragraph 172 above, paragraph 38).

183. According to EDF, the concept of ‘normal market conditions’ is also central when applying, in the case of measures benefiting a public undertaking, the principle of equal treatment. Indeed, pursuant to the principle that the public and private sectors are to be treated equally, capital placed directly or indirectly at the disposal of an undertaking by the State in circumstances which correspond to normal market conditions cannot be regarded as State aid (Case C‑482/99 France v Commission [2002] ECR I‑4397, paragraph 69).

184. In EDF’s argument, if the approach adopted by the Commission were to be accepted, EDF could not rely on that case-law, since the circumstances in which the contested measure was introduced do not correspond to normal market conditions on the sole ground that the State’s use of its fiscal authority falls outside the scope of the ordinary law. EDF nevertheless argues that, although it does not deny that the means used by the State fell outside the scope of the ordinary law, classification as State aid cannot be limited to that solely formal element and thereby dispense with the substance of the case.

185. EDF also considers that Case C‑334/99 Germany v Commission [2003] ECR I‑1139, which is relied on by the Commission in its pleadings – a judgment according to which a distinction must be drawn between the obligations which the State must assume as owner of the share capital of a company and its obligations as a public authority – in reality supports its position, in so far as it presupposes that a comparison is made between the respective actions of the State, acting as an investor, and of a private investor under normal market conditions. However, in the contested decision, the Commission refused ab initio to conduct such an analysis, which is contrary to the principle of neutrality.

186. In response to the Commission’s line of argument that it was merely a ‘tax gift’ or a ‘debt waiver’ which EDF received, EDF submits that a private shareholder may also increase the capital of a subsidiary by a mechanism of incorporating a claim into the capital, a process which is, in essence, perfectly comparable, from an economic standpoint, with the ‘debt waiver’ criticised by the Commission.

187. According to the applicant, a parent company holding a claim against its subsidiary may choose simply to waive that claim, thus generating a profit for the subsidiary, which would in principle be taxable for the subsidiary, unless there are tax losses carried over. After taxation, that amount could be allocated by the subsidiary, at its discretion, towards paying the dividend, creating reserves, etc. However, the parent company could also choose to subscribe to a capital increase in the subsidiary in an amount corresponding to its claim. According to EDF, supported by the French Republic, that latter process generates no taxable profit for the subsidiary under French tax law.

188. EDF submits that, although that process differs from the contested recapitalisation operation on account of the means selected, the fact remains that, in essence, the State has, in this case, merely made what can be treated economically as a capital increase by incorporating the claim. Private undertakings may also avail themselves of that process.

189. EDF therefore submits that, in order to determine whether ‘normal market conditions’ exist, the Commission could not artificially limit itself solely to a formal examination of the means used, but should, on the contrary, have examined the substance of the case, namely the economic rationale for the operation, and must conduct that examination in the context of that time and refrain from any assessment based on a later situation.

190. EDF states that, in its judgment in Chronopost and Others v Ufex and Others , cited in paragraph 172 above, paragraph 38, the Court of Justice held that, in the absence of any possibility of comparing the situation of La Poste with that of a private group of undertakings not operating in a reserved sector, ‘normal market conditions’, which are necessarily hypothetical, must be assessed by reference to the objective and verifiable elements which are available.

191. EDF claims that Chronopost and Others v Ufex and Others , cited in paragraph 172 above, was concerned with comparing costs, whereas this case is concerned with comparing the market conditions in which a capital increase occurs. However, normal market conditions, according to the actual wording of Chronopost and Others , should be assessed by reference to the objective and verifiable elements which are available. It follows, according to EDF, that the Commission cannot, without erring in law and without distorting the concept of ‘State aid’, ‘dodge’ that analysis on the purely formal pretext of the means used by the State to make that capital increase.

192. Finally, EDF claims, in essence, that the private investor test would have been satisfied if the Commission had applied it.

193. In support of its line of argument in that regard, as set out in the application and the reply, EDF produced, when submitting its observations on the statement in intervention of the French Republic, ‘the Oxera Report’, which provided the General Court with supplementary analyses confirming that the private investor test would have been satisfied if it had been applied by the Commission.

194. The Commission maintains that it was not possible to apply the private investor test in this case.

195. The Commission takes the view that by adopting the provisions of Law No 97‑1026, the State acted as a regulatory authority in order to exempt EDF from payment of part of the tax owed. The State was not acting as a shareholder of EDF seeking to obtain medium- or long-term profits from the undertaking.

196. The Commission argues that, if it were to follow the logic supported by EDF, the State would, as a tax authority, be permitted to introduce without restriction any form of ‘discrimination’ by means of the fiscal powers available to it, by contrast with private investors. Indeed, the latter are able to raise capital with a view to making investments only after paying their tax obligations.

197. The Commission also submits, in essence, that allowing the State to rely on the application of the private investor test, where it is acting as a regulator using its fiscal powers, would lead to a ‘dangerous situation’, since the State could consequently claim that all tax exemptions granted to economically sound public undertakings should fall outside the State aid rules in so far as they satisfy the private investor test. Such a situation would give rise to ‘discrimination against undertakings which do not have the opportunity to have the State as a shareholder and/or investor’.

198. According to the Commission, the reasoning adopted by EDF is therefore contrary to Article 87 EC, since it renders that provision completely ineffective, as is clear from recital 97 in the preamble to the contested decision.

199. The Commission takes the view that the very basis of the applicant’s entire line of argument is vitiated by an erroneous premiss, which consists in considering that it is possible to apply the private investor test to the entire operation, that is to say not only to the alleged capital injection, but also to the preceding stage, when the State acted as a fiscal authority in order to introduce the ‘tax exemption’ which constitutes the contested measure.

200. According to the Commission, if the actions of the French State were to be compared to those of a private investor, the irregular creation of provisions by EDF in respect of grantor rights should have been subject to corporation tax before being injected into EDF’s capital. Only such taxation of the provisions could have placed the French State ‘on an equal footing’ with a private investor and would have made it possible for the Commission to consider comparing the actions of the French State with those of a private operator. In so far as that premiss was absent, the Commission could not carry out such a comparison.

201. The Commission claims that, if the French State were actually placed ‘on an equal footing’ with a private investor, it would not be possible to dispute that a ‘tax gift’ from the ‘State qua “regulator”’ does not have the same cost as an investment by the ‘State qua “investor”’. In the first case, in order to benefit an undertaking in the amount of EUR 100, it is sufficient for the State to waive taxes for the same amount. On the other hand, for an undertaking to benefit in the same amount from a private investor, it would be necessary, in particular, to add the tax burden incurred on that amount in order for the undertaking to be able to dispose of it freely. Thus, in this case, that amount of EUR 100 should have been subject to corporation tax at a rate of 41.66%. It follows that in order to provide EUR 100, a private investor would actually have had to raise EUR 141.66.

202. In that context, the Commission submits that the examples presented by EDF relating to the waiver of a parent undertaking’s claim against its subsidiary do not fall within the scope of public authority powers, but concern instruments which may be used by a private investor on the market; they are actually commercial rather than fiscal claims. Accordingly, this is not a merely formal distinction, in so far as the expense for the State would necessarily have a lower cost than that for a private investor.

203. The Commission points out that, according to the principle of neutrality of the system of ownership of undertakings provided for by Article 295 EC, its actions may neither favour nor disadvantage public authorities where they contribute capital to undertakings. However, in the Commission’s view, neither it nor to its knowledge the Court of Justice or the General Court has ever accepted that a State qua shareholder, in making use of its fiscal powers falling outside the scope of ordinary law, may be treated in the same way as a private investor.

204. The Commission points out, in essence, that the unacceptability of ‘tax gifts’ is not dictated by a merely formal concern, but is justified on account of the fact that, in law, aid may take the form of a direct subsidy as well as the waiver of a claim. The automatic prohibition of such ‘tax gifts’ is simply the application of the aforementioned principle of neutrality, accepted by the Court of Justice, according to which ‘a distinction must be drawn between the obligations which the State must assume as owner of the share capital of a company and its obligations as a public authority’ ( Germany v Commission , cited in paragraph 185 above, paragraph 134).

205. The Commission points out that, in that case, the issue was whether the ‘State qua “investor”’ could effectively rely on the application of the private investor test in order to avoid the application of Article 87(1) EC. To do so, it would be necessary to show that the State acted under conditions which would be regarded as normal for a private investor. However, according to the Commission, the Court of Justice points out in that judgment that the exercise of a public authority’s prerogative is not a normal market condition.

206. The Commission also notes that, in a memorandum from the Directorate-General for Taxation sent on 9 April 2002, the latter took the view that ‘the grantor rights in respect of the RAG represent an unowed debt which was unjustifiably exempted from tax by being incorporated into the capital’. It clearly follows that it was a ‘tax gift’ and not an investment.

207. The Commission argues that, contrary to what is claimed by EDF, the contested operation bears no relation to the waiver of a claim by its incorporation into the undertaking’s capital and that EDF wrongly tries to reduce the discussion to a merely formal approach by the Commission without any analysis of the economic rationale for the operation.

208. Having recalled that the reasoning which underlies the application of the private investor test is to avoid any ‘discrimination’ between public and private undertakings with a view to the proper application of the provisions of the EC Treaty relating to State aid, the Commission points out that, according to settled case-law, ‘the test based on the conduct of a private investor operating in normal market-economy conditions ensues from the principle that the public and private sectors are to be treated equally, pursuant to which capital placed directly or indirectly at the disposal of an undertaking by the State in circumstances which correspond to normal market conditions cannot be regarded as State aid’ ( France v Commission , cited in paragraph 183 above, paragraph 69, and Case T‑296/97 Alitalia v Commission [2000] ECR II-3871, paragraph 80).

209. Accordingly, in the context of applying the private investor test, although there was no doubt that the State could make capital available to an undertaking, such an operation may avoid classification as State aid only on condition that the circumstances in which it takes place ‘correspond to normal market conditions’.

210. According to the Commission, it clearly follows from that case-law that the private investor test is applicable only in cases where the circumstances in which the State acts are comparable to those which correspond to normal market conditions. It also follows that the means used by the State form an integral part of those circumstances, in particular where the nature and the characteristics of the means used are not available to a private investor acting under normal market conditions.

211. Moreover, a tax exemption produces, by its very nature, effects which, in any event, cannot be disassociated from the role of the State as the sole holder of the sovereign power to impose and redistribute tax. Since that power is the ‘most absolute expression of public authority’, there is no equivalent to the exercise of it – whether taxation or exemption – which is available to a private investor.

212. With regard to Chronopost and Others v Ufex and Others , cited in paragraph 172 above, the Commission points out that it seems contradictory, on the one hand, to argue that it should apply the private investor test in this case and, on the other hand, to refer to that judgment in which the Court of Justice, having no possible means of comparison, adopted reasoning diametrically opposed to that of normal market conditions. The Commission notes that only the State may at the same time act as a fiscal authority and as an investor.

213. Finally, and in the alternative, the Commission submits, essentially, that in any event the contested measure would not have satisfied the private investor test if it had applied it.

214. In answer to the written questions raised by the General Court, the Commission confirms, in essence, first, that it considers that it was not required to apply the private investor test and, secondly, that it was appropriate to disregard ‘the Oxera Report’, on account, in particular, of the late submission of that report by EDF.

215. Moreover, at the hearing, the Commission put forward several further arguments.

216. First, it submitted that no private investor would have been able to raise such capital at the same cost. Therefore there is, in any event, no reference private investor.

217. Next, in response to the arguments of EDF and of the French Republic that the cost of applying each of the two solutions which the State could adopt (see paragraph 164 above) was identical, the Commission argued that the cost would not be the same under the ‘long plan’. Indeed, according to the Commission, under the ‘long plan’, EDF would have first paid the taxes owed and the ass