Well, it’s official. The European Commission called on the Hungarian government to suspend all further projects in connection with the construction of the Paks II nuclear power plant because Budapest hasn’t followed EU rules governing open bidding procedures. Here is the official press release:
Commission opens infringement against HUNGARY for lack of compliance of the Paks nuclear power plant project with EU public procurement rules
The European Commission decided today to launch an infringement procedure against Hungary concerning the implementation of the Paks II nuclear power plant project. Following exchanges of information with the Hungarian authorities and a thorough assessment of the terms of the award, the Commission still has concerns regarding the compatibility of the project with EU public procurement rules. The Hungarian government has directly awarded the construction of two new reactors and the refurbishment of two additional reactors of the Paks II nuclear power plant without a transparent procedure. The Commission considers that the direct award of the Paks II nuclear power plant project does not comply with EU legislation on public procurement (Directives 2004/17/EC and 2004/18/EC). The Directives consolidate the basic principles of the Treaty on the Functioning of the European Union of transparency, non-discrimination, and equal treatment. These principles seek to ensure that all economic operators have fair chances to participate in a call for tender and to win a contract. The European Commission has decided to send a letter of formal notice to Hungary, which constitutes an official request for information and is the first step in an infringement procedure. The Hungarian authorities now have two months to respond to the arguments put forward by the Commission.
As expected, the Orbán government is defiant. János Lázár in his usual fashion expressed his total disgust with Brussels and promised to bring suit against the Commission if necessary. In his harangue against the EU he judiciously avoided talking about the actual case, the lack of an open tender, which is an EU requirement. Instead, he talked about the EU allegedly prohibiting Hungary from signing bilateral commercial agreements with so-called third countries or such country’s citizens. Hungary has “the right to sign agreements with China, the Arab countries, or for that matter with Russia.” But of course, this is not the issue here. After all, as we learned from José Manuel Barroso’s letter addressed to Viktor Orbán, which I published on Hungarian Spectrum today, the contract with Rosatom was considered to be legal as far as EU law was concerned. The way the contract was awarded, however, was another matter. Barroso in his letter made this eminently clear. Barroso did not, as Lázár now claims, “promise his support of the project in principle.” On the contrary, he called attention to the problem of “the rules on public procurement and state aid.” That was a signal of further probes into the legality of the deal.
Lázár is trying to divert the conversation from the real issue–defiance of EU laws that are on the books to ensure fair competition. Instead, he is trying to show that the controversy is the result of the outsize influence of western multinational corporations. After all, he said, Paks II is one of the largest projects underway in Europe. Large amounts of money can be made by being one of the contractors or suppliers. So, according to Lázár, the issue “is not political but commercial.” Well, indirectly it might be commercial, but what the EU is directly complaining about is an illegal process. The Hungarian government transgressed several European laws and directives that are supposed to ensure equal opportunities to all.
János Lázár was right on one point. He bitterly complained about the length of time it took to deliver the infringement procedure. After all, it was about two years ago that the Hungarian government began final negotiations on the Paks II project. Indeed, it is hard to imagine that it would take two years of solid work to come to the conclusion that Hungary was in the wrong when it signed a contract with Rosatom without open competitive bidding. Népszabadság noted that despite all his blustering, Lázár said nothing about Hungary’s total unwillingness to repeat the bidding process, this time with multiple applicants.
Attila Aszódi, the government commissioner in charge of the project, was asked by many media outlets to comment on the situation. Aszódi is described in his curriculum vitae as an “energy engineer” (energetikai mérnök). Before he was called to head this project he was a full professor at the Institute of Nuclear Technology at the Budapest Engineering University. So, I guess one cannot be terribly surprised that Aszódi is not well versed in legal matters. In his numerous interviews he painted a simplistic picture of the Hungarian position. In his opinion, since the European Union “raised no objections of principle to the agreement from the perspective of article 103,” it means that “the Paks II project itself must be legal.” A huge misunderstanding of the issue.
Meanwhile it turned out that the Hungarian government has spent a fair amount of money already on the project. Moreover, it has drawn on its loan agreement with the Russian government which, if the project comes to a halt, will have to be paid back immediately in one lump sum.
The most amusing news I read in the Hungarian media today was Rosatom’s reaction to the EU suspension of the Paks II project. The mammoth Russian firm announced that “Rosatom follows the dialogue [between EU and the Hungarian government] and fully shares the opinion of János Lázár concerning the legality of the project.” What a surprise.
The Hungarian government is desperately trying to find an effective way to make the problem disappear. One point they emphasize over and over is that no nuclear plant anywhere inside the European Union was built after an open bidding process. So far I have not heard any reporter who could prove or disprove this assertion. It would certainly be a worthwhile undertaking to find out whether the statement is true or not. And if true, what makes the Hungarian case different.