February 18, 2011 / 11:52 AM / 9 years ago

EU court backs Spain coal aid for now

BRUSSELS, Feb 18 (Reuters) - A Spanish plan to support its lossmaking coal industry by forcing utilities to use domestic coal can go ahead for the time being, the European Union’s second highest court said in a preliminary ruling.

The European Commission gave its backing to Spain’s move last September, but it was challenged by Spanish utilities, including Gas Natural GAS.MC, Iberdrola (IBE.MC) and Endesa (ELE.MC) (ENEI.MI), which objected to a scheme that forced them to buy more expensive, lower-quality domestic coal over imports.

The General Court, the lower court of the European Court of Justice, ordered the Commission to suspend its decision in November, while it considered the complaints.

But in a ruling on a request for an interim measure issued late on Thursday, the General Court lifted the suspension saying there was not sufficient grounds to justify the suspension until a more in-depth investigation could be carried out.

The court will now review the parties’ request to annul the Commission’s decision, but has not said when it will hold a hearing on the application. The Luxembourg-based court accepted the Commission’s argument that the Spanish plan would ensure the country’s energy security but said the Commission, the EU’s chief regulator, should have taken a more critical look into the scheme.

“In the presence of potential difficulties ... the Commission could not have restricted itself to the preliminary examination but ought to have opened a formal investigation which would allow for a more thorough and adversarial investigation,” the court said late on Thursday.

“It is for the General Court to decide definitely on this matter ... specifically during the examination of the action for annulment brought against the Commission’s decision. The Spanish competition watchdog has criticised the scheme for distorting investment.

Environmentalist groups the WWF, Greenpeace and ClientEarth, who are critical of the coal aid, have applied to intervene in support of an annulment.

Environmentalists say Spain has an oversupply of natural gas, and at times renewable electricity, so its plea that it is trying to protect the nation’s energy security is false. (Reporting by Foo Yun Chee; Editing by Jon Loades-Carter)

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