EFTA Court
The Registrar
1, Rue du Fort Thüngen
L-1499 LUXEMBOURG

Application for Annulment
– of EFTA Surveillance Authority’s decision of May 31, 2002

I. Introduction and the subject matter of the dispute

1. The applicants

(1.) Technologien, Bau- und Wirtschaftberating GmbH
Baumweg 10, D-60316 Frankfurt am Main, Germany, with
associates

(2.) The Bellona Foundation
Nordregate 2, PO Box 2141 Grünerløkka, 0505 Oslo, Norway

2. Application against
EFTA Surveillance Authority
Rue de Trèves 74,
B-1040 Brussels, Belgium

3. The subject matter of the dispute
Technologien, Bau- und Wirtschaftberating GmbH (henceforth: TBW) and The Bellona Foundation (henceforth: Bellona) hereby brings the EFTA Surveillance Authority (henceforth: ESA) decision of 31 May 2002 – On the notifications of a proposal for amended depreciation rules of the Petroleum Tax Act for production equipment and pipelines for gas linked to new large-scale liquefied natural gas (LNG) facilities located in Finnmark county or the municipalities of Kåfjord, Skjervøy, Nordreisa or Kvænangen in Troms county and the application of these rules to the Snøhvit project. (Aid no 020.500.041) (Norway) – before the EFTA Court, see The Surveillance and Court Agreement (SCA) article 36 paragraph 2, claiming that the decision should be annulled on the following reasons:

· ESA has infringed procedural requirements by not opening formal examination proceedings and not having provided sufficient reasons for its decision;
· ESA has wrongfully interpreted and applied Article 61 (3) (c) of the EEA Agreement;
· ESA has misused its powers and infringed general principles of Community law.

The background and facts of the case are evident of the submitted documents, see point V below. It will, however, also here be given a short overview over the case.

In September 2001, the Norwegian Ministry of Finance proposed an amendment to the Petroleum Taxation Act (PTA) in order to trigger off the Snøhvit liquefied natural gas (LNG) project outside Finnmark (Ot. prp. no. 16 (2001-2002)). The amendment, which involves distinctly favourable depreciation rates for large-scale LNG projects in Norway, was later adopted by the Parliament. On December 11, 2001 Bellona brought the case to the attention of the EFTA Surveillance Authority (henceforth: ESA) claiming that the amendment to the PTA was State aid in the sense of Article 61 (1) of the EEA Agreement and thus, incompatible with the Agreement.

In a letter to the Norwegian Government dated March 18, 2002 ESA said that the depreciation rates for the Snøhvit project could be considered as State aid in the sense of Article 61 (1) of the EEA Agreement. The Authority asked the Government to forward its viewpoints on whether or not the measure could fall within any of the derogation rules in Article 61 (2) and (3) of the Agreement.

The Government adhered to its principal viewpoint that the measure was not State aid, but claimed on a subsidiary basis that it would fall within the derogation for regional aid in Article 61 (3) (c). ESA maintained that the tax measure was State aid in the sense of Article 61 (1), and that its general nature would disqualify it from falling within the derogation for regional aid. In a meeting with the Norwegian Minister of Finance on May 16, 2002, ESA stated that it, unless changes were made to the recently adopted amendment to the PTA, would open formal examination proceedings as prescribed for in Point 5.2 (1) of ESA’s State aid Guidelines.

On May 27, 2002, the Ministry of Finance presented a new law proposal (Ot. prp. nr. 84 (2001-2002)), in which the geographical scope of the tax measure is limited to Finnmark and four municipalities in Troms, located in «zone A» of the regional aid map. The Government approved the proposal in an extraordinary cabinet meeting on the same day, and notified ESA the next day. On May 30 ESA was notified that the favourable depreciation rates would prevail for Snøhvit.

ESA approved the measure as regional aid on May 31, 2002, just on the deadline the main operator of the Snøhvit project, Statoil, had set for continuing with the project.

II. Locus standi
Article 36 paragraph 2 of the SCA requires that applicants should be directly and individually concerned by the decision. The applicants claim that they fulfil the said conditions.

The State aid granted to the Snøhvit-project is directly interfering with and will concern energy supplied from TBW. Thus, TBW, as an energy company in e.g. plant oil fuels and renewable biogas production is concerned due to the formula laid down for instance in the cases 169/84, Compagnie Francaise de l´Azote (COFAZ) SA v. Commission, and 198/91, William Cook PLC v. Commission.

TBW would have been considered as concerned under a formal examination proceedings, see article 1(2) in protocol 3 to the SCA. It follows from the above mentioned cases and the jurisprudence of the European Court of Justice (henceforth: ECJ) that this is sufficient to create locus standi in the sense of article 36 paragraph 2 of the SCA.

Also various existing and planned energy projects related e.g. to hydrogen-energy and fuel cells, in which Bellona is involved, will be directly concerned by the State aid favouring the Snøhvit gas.

Reference is also made to case T-177/01 of May 3, 2002 from the Court of the First Instance, Jégo Quére & Cie SA, where the Court suggests a general revision in the area of locus standi (see paragraph 50). In Case E-2/94, the EFTA Court ruled that «due account should also be paid to the principles laid down in rulings of the Court of First Instance» (paragraph 13).

It is also reason to underline that individual decisions in the field of State aid, like the Snøhvit case, is the area where the ECJ has been most liberal when considering applications admissible.

III. The pleas on which the application is based

1. Infringement of Essential Procedural Requirements

1.1 The decision not to raise objections/open formal proceedings
The applicants will claim that ESA has infringed an essential procedural requirement by deciding not to raise objections, and thereby not opening formal examination proceedings.

Article 5.2 (1) in ESA’s State aid Guidelines stipulates:

«The EFTA Surveillance Authority is obliged to open the procedure provided for in Article 1 (2) of Protocol 3 to the Surveillance and Court Agreement whenever it is in any doubt about the compatibility of the aid with the functioning of the EEA Agreement.»

This paragraph is based on the case law of the ECJ, of which the decision in case C-84/82 (Germany v. the Commission) is of particular interest. Its paragraph 13 establishes as the main criterion for when formal examination proceedings shall be opened, that the surveillance authority is obliged to open such proceedings in all cases in which it has not been able to «overcome all the difficulties involved in determining whether the plan is compatible with the common market».

As far as the applicants are concerned, ESA has failed to fulfil this criterion in the Snøhvit case. The case contains several doubtful factors, which should have obliged ESA to open formal examination proceedings. The existing doubt has by no means been removed through ESA’s May 31 decision.

The applicants find it of particular importance to underline that the amendments to the PTA that were presented by the Ministry of Finance in Ot. prp. nr. 84 (2001-2002) and adopted by the Parliament on June 28, 2002, do not change the content of the tax measure for the Snøhvit project.

ESA considered the tax measure as it originally was shaped in Ot. prp. nr. 16 (2001-2002) to be incompatible with Article 61 of the EEA Agreement and was prepared to open formal examination proceedings on the case in accordance with point 5.2.(1) of the State aid Guidelines. Thus, at this stage ESA was in (considerable) doubt regarding the measure’s compatibility with Article 61.

Although the geographical scope of the aid now has been limited to Finnmark County and four municipalities in Troms County, the distinct depreciation rates for the Snøhvit project are the same as before. In the sense of Article 61 (1) the measure is still State aid granted to the Snøhvit project (this is also evident of ESA’s decision of May 31, 2002). As far as the applicants are concerned the limitation of the geographical scope of the aid is a formal grip taken in order to evade the EEA commitments. The Applicants can not see that this formal grip has removed the previous doubt regarding the measure’s compatibility with the EEA Agreement.

The alleged positive effects for Finnmark are for instance highly questionable. As pointed out in Bellona’s letters of May 13 and 28, the aid may just as well have a negative as a positive regional effect, at least if one considers the region in question as a whole, and not only limits the consideration to the Hammerfest area where the Snøhvit-facilities will be located. ESA’s decision leaves the impression that the Authority has not considered this side of the case, but instead rather uncritically having adopted the viewpoints presented by the Norwegian Government.

Nor the effect on the market and for competitors is properly dealt with (see also point 1.2 below). ESA appears to have acted biased in favour of Norwegian interests. The arguments used by the Government are repeated in ESA’s decision, but these arguments do not seem to have been subject to any independent evaluation, and no proper counter-expertise has been consulted in order to establish an adequate basis for the decision. See for instance point II 4.2 of ESA’s decision.

These issues, as well as a number of other aspects of the case, can only be satisfactorily dealt with through formal examination proceedings where other EEA states as well as concerned undertakings are informed and given the opportunity to submit their comments.

It is also reason to underline that the practice of the European Commission reveals that the Commission regularly opens formal examination proceedings in cases involving State aid at a level similar to the aid granted to the Snøhvit project.

1.2 Lack of reasoning
The applicants also claim that ESA has failed to comply with the obligation of proper reasoning laid down in article 16 of the SCA and the case law from ECJ and the EFTA Court.

The importance of proper reasoning and the basis for the evaluation is expressed in the EFTA Court’s decision in case E-2/94, see paragraphs 25, 26 and the following.

The applicants will put forward that this duty should be interpreted in accordance with the size and importance of the case in question. They believe that neither the quantity nor the quality of the decision text in the present case can satisfy these conditions. Very little of the decision text actually deals with the doubtful aspects of the case. Moreover, the Authority’s reasoning is inadequate on several points.

The arguments put forward in Bellona’s letters to ESA of May 13 and 28, 2002, are for instance not handled properly. Although the correspondence and some of the arguments are mentioned under «Facts», they have not been taken into proper consideration in the «Appreciation»-part. The reasoning thus, indicates that the Authority has acted biasedly in favour of Norwegian interests.

Another example of inadequate reasoning by ESA is its evaluation of the question whether or not the amendment to the PTA is contrary to the common interest, see point II 3.2 and II 4.2.

In these points there is also a lack of reasoning regarding the question of positive regional effects. These alleged positive effects are not properly «demonstrated» by the Norwegian authorities, as ESA claims. As mentioned above, ESA has not itself carried out any independent evaluation of these issues, but instead more or less uncritically rendered the arguments presented by the Norwegian Government in its letters to ESA of April 19 and 30, 2002.

2. Infringement of the EEA Agreement article 61(3) c
The applicants will also claim that the decision implies an infringement of Article 61 (3) (c) of the EEA Agreement. The tax measure in question is not compatible with Article 61 (3) (c) and thus, ESA has in the present case wrongfully interpreted and applied the provision.

Despite of ESA’s margin of appreciation, the decision must be declared as an infringement. ESA has not acted in accordance with case law.

The amendment to the PTA is in real terms an individual decision that will affect competition conditions within the EEA in a way contrary to the common interest, and can thus not be upheld.

ESA spends a lot of energy elaborating on the maximum allowable aid intensity and the general regional aid scheme. However, this reasoning does by no means demonstrate that the specific measure employed in this case is compatible with Article 61(3) c of the Agreement.

The applicants would in particular underline that ESA has considered the tax measure for the Snøhvit project as a scheme within the «Mulitisectoral framework on regional aid for large investment projects» set up in chapter 26 of ESA’s State aid Guidelines. According to the guidelines it has to be established that the aid should have a general positive effect for the whole region in question. Such an effect has, as pointed out above, not been established in the present case.

3. Misuse of powers. Infringement of general principles of Community law
As a whole the case indicates that ESA has misused its powers, contrary to the relevant principles laid down in the case law of the ECJ. Also this should lead to the annulment of ESA’s decision.

While ESA had the Snøhvit case to consideration, its president, Mr. Einar Bull several times stated publicly that he is in favour of the project. On March 24, 2002 he for instance said to the newspaper Finnmark Dagblad that «personally I wish that the [Snøhvit] project shall continue».

The impartiality and independence of ESA is obviously of vital importance, and statements like the above-mentioned make it highly questionable whether or not ESA in the present case has acted as an independent surveillance authority. Also other incidents may give reasons to question ESA’s independence. It has for instance been reported in the press (in particular Aftenposten on May 16, 2002) that there was a meeting between representatives of ESA and the Norwegian Government in mid September 2001. At this meeting, where no minutes were taken, the Government representatives apparently interpreted the statements from the ESA-representatives as an approval to continue with the distinct depreciation rates for the Snøhvit project without ESA interference.

The applicants fully understand the need for finding pragmatic solutions and that meetings between the Authority and Government-representatives may be useful in order to find such solutions. They will, however, claim that ESA in the present case has gone beyond the limits of the acceptable, having guided Norwegian interests rather than exercising its surveillance duties. As a result of this, the interests of other EEA states and undertakings may have been neglected in a manifest way.

Also the time between the Norwegian notification and the decision from ESA indicates that ESA has had an improper purpose. Norway notified on May 27 and 30, 2002, and the measure was approved by ESA on May 31, 2002. Although the Authority of course was well into the case by then, this is an alarmingly short period, which may well indicate that ESA has been guided by improper objects/purposes in the present case.

It is also reason to point out that the main operator of the Snøhvit project, Statoil, in several communications with the Norwegian Government has stressed that it would not continue with the project if not all issues involving ESA and the EEA Agreement were solved before May 31, 2002. The fact that ESA just made the deadline set by Statoil further strengthens the impression of a decision based on misuse of powers rather than on objective and independent deliberations.

Although ESA through Bellona’s communications was held aware of the doubtful aspects of the case, it neglected to take these into consideration (see for instance point II 1.2 above). This further demonstrates the Authority’s lack of objectivity and misuse of powers in the present case.

IV. Costs of the proceedings
The applicants request the EFTA Surveillance Authority to pay the costs of the proceedings, see article 66 in Rules of Procedure of the EFTA Court.

V. Submitted documents
· The Norwegian Ministry of Finance: Ot. prp. nr. 16 (2001-2002), September 2001
· Bellona: Complaint to EFTA Surveillance Authority, December 11, 2001
· EFTA Surveillance Authority: letter to the Norwegian Government, March 18, 2001
· The Norwegian Government: letter to ESA, April 19, 2002 (full text is not available)
· The Norwegian Government: letter to ESA, April 30, 2002
· Bellona: Additional Comments, May 13, 2002
· The Norwegian Ministry of Finance: Ot. prp. nr. 84 (2001-2002), May 27, 2002
· Bellona: Additional comments to ESA, May 28, 2002
· EFTA Surveillance Authority: Decision, May 31, 2002