State Aid and Essential National Interest

By: Phedon Nicolaides (Lexxion)

State aid should support outcomes that the market by itself cannot achieve. This implies that State aid that is restricted to only one or a few undertakings is unlikely to be capable of delivering the desired outcome. Yet, sometimes there may be good reasons for restricting the beneficiaries of State aid. On 29 April 2021, the Court of Justice dealt with this issue in case C‑847/19 P, Achemos Grupė & Achema v European Commission, concerning the direct award of a contract to the operator an LNG terminal in Lithuania.

The judgment of the Court is important because it highlights that essential national interests may justify deviation from the normal public procurement procedures.

Deviating from public procurement rules by, for example, awarding directly a contract, is always problematic from a State aid perspective because, by and large, it confers an advantage that may constitute State aid. By implication, State aid that violates other provisions of EU law, such as public procurement, makes it more difficult for that aid to be considered compatible with the internal market. However, as the Court confirmed in the Achemos case, the aid can be compatible if the direct award is necessitated by reasons of essential national interests which are recognised as an exemption from the requirements of public procurement directives.

Achemos and Achema appealed against the judgment of the General Court in case T-417/16, Achemos Grupė & Achema v European Commission. In that judgment the General Court dismissed their request for annulment of Commission decision SA.36740 which found aid granted by Lithuania to Klaipėdos Nafta compatible with the internal market. The judgment of the General Court was reviewed here on 8 October 2019…

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