The Evidence Grows that the Polish Government has no Plan to Deal with State Aid Problems

Today, new disclosures show that the Polish Government is still getting enforcement questions from the DG Competition on the co-generation program. Last year, the Commission told UOKiK that the co-generation certificates were state aid. See UOKiK, November 28, 2013. UOKiK also acknowledges in the same correspondence to the Minister of Economy that the Commission maintains that the Green Certificates are state aid as well. The continued assumption of the Polish Government is that changes in the current programs of support which might be exempt from notification under the GBER regulation as to new aid in the future, will somehow how cure unlawful aid in the past. This is totally inaccurate and has positively no legal support.

The Polish Government notified the Commission of the co-generation law in 2013 and did not receive a quick answer that it was "not state aid." The Commission came back with detailed questions aimed at getting the information necessary to determine if the program was compatible with the current state aid guidelines (2008). See S.A. 36518 - certificates of origin for co-generation, May 31, 2013. This is no surprise because since 2001, the European Commission has found that every RES/CHP certificate program had provisions that constituted state aid.[1] The Polish Government has known this for sometime. The head of the Office of Competition and Consumer Protection (UOKiK) communicated this to the Ministry of Economy on November 28, 2013:

     "According to the OCCP, the [Green] certificate system constitutes state aid. Detailed clarification in   regard has been presented in previous correspondence [citing June 5, 2012 and August 10, 2012 correspondence from UKOK to MG]'. Moreover, similar conclusions have been expressed by the European Commission within the framework of the ongoing process notification of the restoration of the certificate system for high-efficiency co-generation.” [referring to the Commission's May 31, 2013 opinion on co-generation certificates in Poland, S.A. 36518](emphasis added).

State aid that has been provided without notification and approval must be recovered.[2] The consequences of illegal aid to Poland are enormous. Unlawful state aid is always recovered. “In cases where Member States do not notify the Commission of its plans to grant or alter aid prior to such aid being put into effect, the aid is unlawful in relation to Community law from the time that it is granted.” Notice From The Commission, “Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid,” (2007/C 272/05), par. 8. See COUNCIL REGULATION (EC) No 659/1999, par. 13. See et al. "State aid: Commission approves German aid scheme for renewable energy (EEG 2012); orders partial recovery," November 25, 2014; "Commission orders Poland to recover incompatible state aid from Gdynia airport," February 13, 2014; "Commission orders recovery of illegal state aid from Italian maritime company Saremar," January 22, 2013; "European Commission Orders Spain to Recover Illegal State Aid," October 14, 2014;"European Commission Orders Recovery Of State-aid From German, Belgian Airports" October 1, 2014; "Commission orders Bulgaria to recover incompatible State aid," May 9, 2014. Recovery of unlawful aid is a requirement enforced by the EU without any significant exceptions.  

The Court of Justice of the EU (previously ECJ) has also recently ruled that even the Commission's commencement of an investigation (as in this case) of unnotified aid requires that the Member State courts order the recovery of the aid immediately without further action by the Commission.[4] See Deutsche Lufthansa AG v Flughafen Frankfurt-Hahn GmbH (C-284/12) November 21, 2013. Any person paying an electricity bill in Poland that includes the pass through of Green Certificate and co-generation charges has standing to demand a refund and to order the cessation of the support. See discussion of the consequences of the French wind ECJ case on claims by electricity users in France.

 In the instance of state aid simply found unlawful due to the notification failure, the remedy can be simply curing the notification problem.…even non-notified aid can – in case for example it has been brought to the attention of the Commission by a complaint – still be authorized ex post, so that aid already paid need not be recovered.[3] This requires a retroactive notification as was done in the case of the French wind state aid dispute. 

But the system that is retroactively notified must meet the 2008 State Aid guidelines (and other previous precedents) and be based on the levelized cost of production. See S.A. 33995 (November 25, 2014) where the Commission decided that German aid to energy-intensive industries was required to meet the then-in-effect guidelines [5] and that some of the support exceeded the reasonable level based on costs and must be recovered. So to avoid recovery of the support (both Green Certificates and co-generation certificates), the support system must be adjusted to retroactively only provide support in relation to the cost of production plus a reasonable profit. See UOKik, November 28, 2013; June 5, 2012. Accord State aid N 437/2009 - Romania Aid scheme for the promotion of co-generation. This could utilize the approach of the 2012 MG draft RES law and the prospective correction coefficients of the IEO report. But for prior years, there would have to be another calculation of the costs of production across technologies. See UOKiK, supra

There is no serious legal dispute on any of these issues. Yet somehow the Polish Government continues bluff with everyone involved, pretending that there is no state aid and that there will be no recovery required. Since the Government's own internal competition expert, Malgorzata Krasnodebska-Tomkiel, long-standing head of UOKiK, advised the government of these facts in 2012-2013, it is hard to attribute the position of the Polish Government to ignorance of the law.

The notion that a prospective support system that fits into the prospective state aid guidelines will cure the current problems is farcical. The only errors that a prospective change can fix are those of "existing aid" which was in effect before Poland joined the EU. The first support for RES was one year later. Every month that passes increases the enormity of the problems and the pain of the transition. The timing of all of this guarantees that it will be an election issue next year and the ruling coalition looks pretty irresponsible at this point.


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[1] C(2001) 3267 Final, State aid No N 504/2000 – United Kingdom Renewables Obligation and Capital Grants for Renewable Technologies, November 28, 2001; State Aid N 550/2000 -Beligan Green Certificates; State Aid N 789/2002 — Sweden — Green certificates; State aid SA. 33134 2011/N – RO, Green certificates for promoting electricity from renewable sources, C (2011) 4938, July 13, 2011.


[2] State aid that is done without notification is unlawful and must be recovered from the recipients. See CELF case (C-199/06) European Court of Justice, February 12, 2008. . “In cases where Member States do not notify the Commission of its plans to grant or alter aid prior to such aid being put into effect, the aid is unlawful in relation to Community law from the time that it is granted.” Notice From The Commission, “Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid,” (2007/C 272/05), par. 8 (emphasis added). The European Court was completely clear in the CELF decision:
"In order to ensure the effectiveness of the Commission’s role in monitoring and reviewing aid in the Community interest, Article 88(3) EC imposes two unequivocal obligations on Member States when they intend to grant a new aid or alter an existing aid: a notification and a so-called ‘standstill’ obligation. The first sentence of Article 88(3) EC requires the Member States to inform the Commission of a planned aid in due time. The last sentence of Article 88(3) EC imposes an additional obligation on the Member States concerned to refrain from implementing the aid until the procedure provided in Article 88 EC has resulted in a final decision by the Commission. Thus, as the Court pointed out in Adria-Wien Pipeline and Wieterdorfer & Peggauer Zementwerke, Article 88 EC ‘imposes on Member States specific obligations to facilitate the Commission’s task and to prevent faits accomplis for that institution.’"  Member States may not grant State aid until the Commission has adopted a final decision stating that the aid in question is compatible with the common market. Failure to comply with those obligations renders the State aid unlawful. [par. 22-23](emphasis added). If anyone doubts that this means exactly what is says, look at the response of the French wind industry and French Government to the European Court of Justice case. See prior post.


[3] Becker, Buttner and Held, “The Legal Help Desk: Understanding State aid in European law,” http://www.keepontrack.eu/contents/virtualhelpdeskdocuments/understanding-state-aid-in-european-law.pdf


[4] The Commission has directly addressed what rules will apply to the Polish certificate cases. There wil not be resolved by the new guidelines effective 2017, but by the rules in effect at the time. "Aid which has not been notified to the Commission will however be assessed on the basis of the guidelines in force at the moment of granting the aid (i.e. where applicable, the Guidelines on aid for Environmental protection adopted in 2008), with one exception: the new guidelines will apply retroactively for the assessment of reductions in the financing of renewables for energy-intensive users. The possibility for such reductions was not foreseen in the previous guidelines." (emphasis added). Energy and Environmental State aid Guidelines – Frequently asked questions, European Commission - MEMO/14/276 09/04/2014.

[5] "The European Court of Justice decided on 21 November 2013 that EU national courts must assume that a measure qualifies as State aid, if the European Commission has opened an in-depth investigation into that measure. This judgment is relevant to all cases in which the disputed measure was already granted, or is planned to be granted, and the European Commission has opened an in-depth investigation but not yet made a final decision on whether or not the measures qualify as State aid. "The European Court of Justice (ECJ) decided on 21 November 2013 in Deutsche Lufthansa AG v Flughafen Frankfurt-Hahn GmbH (C-284/12) on the obligations placed on national courts in EU Member States that have been asked by a third party to order the recovery of State aid that was granted to a beneficiary without approval by the European Commission. "The ECJ stated that, even though the assessment carried out by the European Commission in its decision to open an in-depth investigation is preliminary in nature, the decision to open an investigation has legal effect and is therefore binding for national courts in that they must find that the measure qualifies as State aid. If the aid was granted without approval by the European Commission, the national court will have to order its recovery." McDermott Will & Emery. (emphasis added).

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