Independent lawyers’ report confirms Tuzla 7 guarantee contains elements of state aid

Independent lawyers have confirmed the Energy Community (EnC) Secretariat’s finding that the Tuzla 7 guarantee contains elements of state aid, the Secretariat said in a press release. It asked the State Aid Council of Bosnia and Herzegovina (BiH) to re-examine the guarantee in line with the EnC state aid acquis.

A week ago, the Secretariat urged the Parliament of the Federation of BiH (FBiH) to postpone its decision on the guarantee for the EUR 614 million loan from the Export–Import Bank of China’s (Chexim – China Exim Bank) to state-owned power utility Elektroprivreda BiH (EPBiH) to build a new, 450 MW unit of the Tuzla coal-fired power plant. The Parliament has since postponed its decision from February 28 to March 7.

According to the Secretariat’s press release, independent lawyers have analyzed the State Aid Council’s decision and the underlying public guarantee and have confirmed the Secretariat’s finding that the Tuzla 7 guarantee contains elements of state aid.

The Secretariat has submitted the opinion to the State Aid Council and asked it to reopen its procedure and re-examine the guarantee in line with the EnC state aid acquis.

The Secretariat also reiterates that the Parliament of the FBiH should not approve the guarantee, based on a non-compliant decision from its state aid authority.

However the Secretariat, in line with its agreement with the institutions and companies of BiH, commits to support a clear and final decision in line with EnC law, which would also restore legal certainty for the project.

“Parliament of the FBiH is not in a position to lawfully confirm the guarantee”

In its analysis, law firm Sheppard Mullin said that the Tuzla 7 guarantee constitutes state aid within the meaning of the Treaty on the Functioning of the European Union (TFEU) and the EnC Treaty, which have primacy over the BiH law.

The Tuzla 7 guarantee constitutes state aid within the meaning of Article 107(1) TFEU and of Article 18 (c) of the Energy Community Treaty, the conclusion of the analysis reads.

Therefore, the State Aid Council of the BiH should examine the compatibility of the guarantee under state aid rules, while the Parliament of the FBiH is not in a position to lawfully confirm the guarantee at this stage, according to the conclusion.