According to today’s EC release (IP/13/391), opening an inquiry does not in any way prejudge the final outcome; it simply gives interested parties the opportunity to submit their observations.
As the concession holder for the high-voltage transmission network in France, EDF created accounting reserves between 1987 and 1996 with a view to renovating the grid. In 1997, when EDF’s balance sheet was restructured, the French authorities reclassified the part of these provisions as a capital contribution without subjecting them to corporation tax.
Following an in-depth examination, the EC decided that the non-payment of corporation tax on these provisions had conferred a selective advantage on EDF and amounted to state aid that was incompatible with the internal market. The EC directed France to recover this aid (estimated at €888.89 million, with interest).
The General Court of the European Union in December 2009 annulled this decision on the grounds that, when examining the French authorities’ reclassification of the provisions as a capital contribution, the EC had not checked whether a private investor would have invested a comparable amount under similar circumstances. This judgment was upheld by the CJEU in June 2012.
EC reopens investigation
The EC, thus, has reopened the inquiry and extended its scope in order to reach a finding in accordance with the criteria set out by the EU courts.
The EC will consider the economic reasoning and the expected profitability at the time of reclassifying the provisions in the light of what a private investor would have done with the same company under similar circumstances. This will extend the scope of the inquiry to allow the French authorities or any interested third parties to submit their observations on the question of whether the non-payment of tax could in fact represent an investment, and, if so, whether a prudent private investor would have made a comparable investment.