Court of Justice dismisses European Commission appeal on oil group State aid

The Court of Justice has upheld a ruling of the General Court that annulled a European Commission decision that held that Hungary had conferred a selective advantage on Magyar Olaj or “MOL” in violation of EU State aid rules.

Hungary and MOL agreed in 2005 to extend the oil group’s rights to exploit 12 hydrocarbon fields for an additional five years. The fee payable for the extension was fixed at 12 per cent of the value of the hydrocarbons extracted and also applied to 137 additional hydrocarbon and natural gas fields owned by MOL.

In 2008 Hungary’s mining laws changed resulting in an increase in the extension fee to 30 per cent of the value of the extracted resources. This increase was not applied to MOL’s fields which continued to benefit from the lower rates agreed in 2005.

The Commission found that this amounted to unlawful State aid because it had the effect of preferring MOL over its rivals by granting it the benefit of lower rates from 2008. It ordered recovery in the sum of EUR 103 million.

The Court of Justice agreed with the General Court that the circumstances did not involve State aid. There was insufficient nexus between the 2005 agreement and the 2008 legislative change to conclude that MOL had benefited from a selective advantage. The fact that the 2005 rates were agreed following negotiation between MOL and Hungary did not mean that there was a selective advantage.

 

The judgment affirms that the limited discretion of a Member State to determine the level of additional fees through agreement with the affected business can be distinguished from a legislative discretion that automatically grants a selective advantage to the economic operator. The Court also rejected as relevant the fact that MOL was the only operator to enjoy the lower rates from 2008. It appears that the Commission had not established that the 2005 agreement was concluded in anticipation of the 2008 changes. The issue of whether the measure was selective had been discussed only in relation to the 2005 agreement and not through the combination of the 2005 agreement and 2008 legislative changes. The judgment has firmly put the onus on the Commission to justify its case and underscores that it must clearly establish the circumstances giving rise to the alleged selective advantage.

Case C‑15/14 P - European Commission v MOL Magyar Olaj- és Gázipari Nyrt, judgment of 4 June 2015.