European court dismisses Austrian concerns about Hungary’s Paks-II

1 December 2022

The Court of Justice of the European Union (CJEU) has dismissed an action by Austria contesting the European Commission's (EC’s) approval of investment aid for an upgrade of Hungary's Paks NPP. Austria had argued that Hungary's direct award of the project to a Russian contractor in the framework of an agreement involving €10 billion ($10.44bn) of credit from Russia violated European Union rules on public procurement. The EC had cleared the aid, subject to conditions, citing a provision in the Treaties that allows aid for certain economic activities as long as it "does not adversely affect trading conditions to an extent contrary to the common interest".

"Assuming that a tender procedure may have had an influence on the amount of the aid, which Austria has not proven, such a factor would not by itself have had any effect on the advantage which that aid constituted for its recipient," the CJEU said in a statement on the decision.

CJEU also rejected allegations of "disproportionate distortions of competition and unequal treatment", resulting in the exclusion of producers of renewable energy from the deregulated internal electricity market, noting that member states are free to decide the composition of their own energy mix, while the EC cannot require that state financing be allocated to alternative energy sources. The EC cleared the aid for the construction of two blocks at the Paks plant, Hungary's sole commercial source of nuclear energy, in the spring of 2017.

Hungarian Foreign Minister Péter Szijjártó said the decision was a great victory for Hungary. “In terms of both licensing and financing, the seal of approval of the European Court of Justice is on the Paks investment ” he noted.

Currently, the Paks NPP, built according to the Soviet design, operates four power units with VVER-440 reactors. The Hungarian Parliament in 2009 approved construction of two new units. The Paks II project was launched in 2014 by an inter-governmental agreement between Hungary and Russia for two VVER-1200 reactors (units 5&6) to be supplied by Rosatom. The contract was supported by a Russian state loan to finance the majority of the project. The Hungarian Atomic Energy Authority (HAEA) issued the licence for the units in August. Preparatory work is already underway at Paks-II.

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