CYIL vol. 15 (2024)

CYIL 15 ȍ2024Ȏ STATE AID BY CZECHIA TO DUKOVANY II the general public. If the political tide changes during a nuclear new build project, which is planned over multiple years, aborting the project is a very large risk for private investors. In Hinkley Point C, the UK government proposed compensation for investors if the nuclear power plant at Hinkley Point C would close on political grounds or if the state-owned company would fail to pay its contract for difference payments. 14 That is also why, as set out above, Czechia designed a mechanism that would safeguard the utility in the event that certain unanticipated events occur, e.g., a change in Czech law or policy that would impede the construction of Dukovany II . Regulatory risks in nuclear projects are also considerable, e.g., at the Vogtle site. 15 Once the European Commission has evaluated the positive condition in its assessment of the compatibility of the envisaged aid for a nuclear investment project with the TFEU and has duly taken account of the Euratom objectives and market failure, it proceeds to assess the corollary negative condition, by checking whether the aid unduly distorts competition and trade between EU Member States. The European Commission only considers the aid to be compatible with the TFEU if, on the one hand, it addresses market failures for which no alternative aid instrument exists that would be less distortive of competition and if, on the other hand, the amount of the aid is limited to the minimum necessary. Importantly, the positive and negative conditions of the second limb of the state aid test are tied to each other. That is why the European Commission carries out a balancing exercise when assessing both conditions: it weighs the positive effects of the development of nuclear energy against its negative effects on competition and trade between EU Member States. In the recent Hungarian PAKS II case, 16 when applying the second limb of the state aid test, the European Commission considered the aid to be compatible with Article 107 TFEU because Hungary’s aid to PAKS II was necessary and proportionate, taking the Euratom objectives and market failure into account, and because the limited distortion of competition that it triggered was offset by the project’s positive effects. 7. The second limb of the test applied to Dukovany II . The European Commission assessed the compatibility of Czechia’s state aid to Dukovany II applying, on the one hand, the positive condition and, on the other hand, the negative condition to verify compatibility with the TFEU. When evaluating the positive condition, the Commission examined whether Czechia’s envisaged aid for Dukovany II was necessary and proportionate, taking account of the objectives of the Euratom Treaty and market failure. The Commission’s assessment of the necessity of Czechia’s planned aid analyzed various angles of said necessity. 14 Idem. 15 Nuclear designer Westinghouse did not obtain the regulatory approval by the US regulator and had to replace half of the material of its AP1000 technology, which caused delays and cost overruns. Such delays and cost overruns, in turn, cause damages claims and liability litigation; https://www.nrc.gov/reactors/new-reactors/large lwr/design-cert/ap1000.html, more particularly https://www.nrc.gov/docs/ML1134/ML113480014.pdf. 16 Commission Decision (EU) 2017/2112 of 6 March 2017 on the measure/aid scheme/State aid SA.38454 – 2015/C (ex 2015/N) which Hungary is planning to implement for supporting the development of two new nuclear reactors at Paks II nuclear power station (notified under document C(2017) 1486); https://eur-lex. europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2017:317:FULL.

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