EU General Court ruling saves MOL €122 million penalty

Issues

Overturning a European Commission decision of 2010, the European Union General Court today exonerated oil-and-gas giant MOL from a penalty of €122 million it had been ordered to pay.

In July 2010, the EC first investigated, then found MOL in violation of EU fair-competition regulations due to the company’s fixing of mining royalties in Hungary-based fields through 2020. After MOL readjusted the royal rates in 2008, the company went ahead paying out on the ’05 numbers.

The Commission found in an investigation that an agreement between MOL and the government in 2005 fixed mining royalties for most of the company's fields in Hungary until 2020. Although royalties were raised by an amendment to the Mining Act in early 2008, MOL continued to pay the same royalties agreed on earlier, the Commission.

“The investigation has proven that MOL benefited of a financial advantage by paying lower mining fees than its competitors. This type of clearly discriminatory aid is not allowed under EU rules,” said Commission Vice President and Competition Commissioner Joaquin Almunia.

General Court judges today ruled that other companies had applied similar agreements and could find no evidence “that [the Hungarian] authorities treated the applicant favorably in relation to any other undertaking in a comparable situation.”

The mining fees set in 2008, meanwhile, we found to have “reflected dramatic increases in the international price for crude oil and need not be interpreted as an attempt by the [Hungarian] government to favor MOL.”

As a result of the decision, share prices in MOL on the Budapest Stock Exchange gained the most in three weeks in this morning’s trading. According to Bloomberg news service, MOL shares climbed 1.1% to HUF 14,430 by 11:37 a.m. today.

The EC has two months to decide whether to appeal the General Court decision with the European Court of Justice.

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