EU court annuls approval of state aid for construction of Hungary's Paks II power plant

The Court of Justice of the European Union has annulled the European Commission’s (EC) decision to approve state aid for the construction of Hungary’s Paks II nuclear power plant. The court announced the decision today in a press release. The EU’s highest court upheld Austria’s appeal against the ruling of a lower EU court, which had approved the EC’s decision in 2022. The Hungarian government agreed a construction timetable with Russian state-owned company Rosatom two years ago for two new units at the plant, which Moscow says are due to be handed over early next decade.

The court said today that the Commission had not adequately assessed whether state financing for the completion of the plant complied with EU law. In 2017, the EU executive concluded that Hungary’s approach did not breach EU state aid rules and approved the project. However, the court said it should also have examined whether the project complied with public procurement rules. The court said that a direct award of the contract was necessary for the allocation of state aid for the plant’s construction, so the Commission should have examined this aspect as well.

Austria, a long-standing opponent of nuclear energy, considered Hungarian state aid to be inadmissible under competition rules and brought the case before the EU courts in 2018. It lost at the lower court and therefore lodged an appeal with the highest court.

The Paks power plant, located about 100 kilometres south of Budapest, has been in operation since 1982. Its four existing reactors meet about 50 percent of Hungary’s energy needs. Under the contract, Rosatom is to build two new reactors.

Hungarian-Russian energy cooperation is often criticised in the EU. Hungarian Prime Minister Viktor Orbán has long been known for his close ties with Russian President Vladimir Putin and has repeatedly called for the lifting of sanctions imposed by the EU on Russia for its invasion of Ukraine. Hungary is also seeking to continue importing Russian fossil fuels, from which the EU wants to disengage.