New Hungarian NPP Paks II built by Russia in trouble after today’s EU court decision?

The Hungarian government initially granted state aid for the construction of two new reactor blocks at the Paks II nuclear power plant. While the European Commission approved the funding in 2017, Austria appealed the decision. Now, the European Court of Justice has ruled differently, potentially restarting the full review process and casting doubt over the viability of the contract with the Russian contractor. According to the government, the court’s decision will not cause any delays, and construction work is soon set to begin.

What troubles have beset Paks II?

The Paks II project, undertaken with Russian financing and a Russian contractor under an intergovernmental agreement, last made headlines earlier this year when independent MP Ákos Hadházy claimed the Russian firm was laying off large numbers of employees. Just days later, the project again attracted attention when the Paks II site experienced a shift in the retaining wall of one of its foundation pits. While Rosatom was reportedly unaware of the incident, the German contractor remained silent.

Now the project is back in the spotlight after the Luxembourg-based European Court of Justice overturned the European Commission’s 2017 decision, which had concluded that Hungary’s state aid was proportionate, limited in scope, and minimally distortive to competition, granted for the construction of two VVER-1200 reactor units.

• Paks NPP expansion: the Hungarian Atomic Energy Authority bans work in parts of the 5th block construction site – PHOTOS

Russian contractor awarded project without open bidding

The construction was awarded without a public procurement process to the Russian company Nizhny Novgorod Engineering (NNE). While the European Commission originally approved this, Austria filed a lawsuit in 2018 challenging the decision. According to Portfolio, Austria argued that the direct awarding of the contract violated EU procurement rules, and the Commission had erred in granting approval. Portfolio reports no new Austrian evidence, suggesting none was submitted in the case.

At the end of the proceedings, the Court annulled a previous decision by the General Court of the European Union, which had found that Hungary acted lawfully in providing state aid for Paks II.

What was the Court’s issue?

The European Court found that the Commission had failed to fully assess whether the direct, competition-free contract with the Russian NNE was compliant with EU procurement laws. The Court argued that a competitive bidding process might have resulted in a cheaper project.

Is Paks II being halted?

Not for now. What is certain is that the European Commission will open a new procedure, also examining whether bypassing a procurement process was appropriate. For those familiar with politics, the Hungarian government’s ongoing conflicts with the current Commission, and the shift in EU-Russia relations since 2017, the likely outcome of this investigation may already seem apparent.

• Hungary to install U.S.-developed modular nuclear reactors: Is energy sovereignty coming?

The outcome of this investigation may ultimately compel the Hungarian government to issue a new procurement call—an action that could jeopardise the existing contract with Russia. Portfolio also notes that the procedure is unlikely to be brief.

Nevertheless, the ruling does not prohibit continuation of the project. Minister János Bóka quickly responded on behalf of the government, stating the Court found no legal violations and did not declare the procurement process or the state aid illegal. According to Bóka, the project will proceed as planned, beginning with concrete works, as reported by Portfolio.

CJEU judgment won’t restrict or slow Paks II investment, says FM Szijjártó

A judgment on Thursday by the Court of Justice of the European Union (CJEU) “will not restrict or slow to any degree” the Paks II project to upgrade Hungary’s sole commercial nuclear power plant, Minister of Foreign Affairs and Trade Peter Szijjarto said at a joint press conference with his Austrian counterpart Beate Meinl-Reisinger in Budapest.

In a statement issued by his ministry, Szijjarto stressed that the judgment had annulled an earlier decision by the European Commission. “This judgment will not restrict or slow to any degree the advance of the investment. On the contrary, we have accelerated the investment recently,” he said. Paks II remains a “pillar” of Hungary’s future energy security, he added.

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