The European Court of Justice has annulled the European Commission's prior approval of state aid for Hungary's Paks nuclear power plant expansion. The ruling, following an appeal by Austria, found that the Commission had not adequately verified whether the contract for the project complied with EU public procurement rules.
The Paks expansion project, which involves Russia's Nizhny Novgorod Engineering, was initially approved by the European Commission in 2017. However, the Court of Justice emphasized that the Commission should have assessed the legality of awarding the construction contract directly to a Russian entity without a public tender, considering it an integral part of the state aid package. This oversight led to the annulment of the Commission's earlier decision.
Austria had first challenged the state aid approval in 2018. Despite an initial dismissal of its appeal by the EU's General Court in November 2022, Austria pursued the matter to the EU Court of Justice and succeeded in its appeal. The Court confirmed that the Commission should have verified whether the direct award of the contract complied with EU public procurement rules.
Russia's state nuclear company, Rosatom, has reiterated its commitment to the Paks project, asserting adherence to international safety standards and contractual obligations. The expansion involves the construction of two new VVER reactors, each with a capacity of 1.2 GW. The existing four reactors are scheduled for decommissioning between 2032 and 2037.
The European Commission's initial approval in 2017 allowed the project to proceed under EU state aid rules. The Court of Justice's ruling underscores the importance of carefully assessing compliance with EU public procurement regulations, especially for major infrastructure projects involving foreign entities and significant state financing.