The European Court of Justice has annulled the European Commission’s 2017 decision approving Hungarian state aid for two new reactors at the Paks nuclear power plant, finding that Brussels did not examine whether the construction contract—awarded directly to a Russian company—complied with EU public procurement law.
The judgment, delivered on 11 September, sets aside an earlier ruling of the General Court that had upheld the aid, and sends the matter back to the Commission for reassessment.
Hungary awarded the Paks II construction contract without a public tender to Nizhny Novgorod Engineering, part of Russia’s nuclear supply chain, under an intergovernmental agreement on the peaceful use of nuclear energy. Russia also agreed to extend a state loan to finance most of the project. The Commission authorised the aid in March 2017 by Decision (EU) 2017/2112. The Court held that, before approving state support, the Commission ought to have verified whether the direct contract award complied with EU procurement rules.
Neighbouring Austria challenged the 2017 approval before the General Court in 2018 and lost, then appealed to the ECJ. In February 2025, the Court’s advocate general recommended siding with Austria, arguing that the Commission should have assessed the procurement issue. The Grand Chamber has now agreed, annulling the approval decision and requiring the EU executive to revisit its analysis.
The ruling does not itself terminate the project. Rather, it removes the Commission’s legal authorisation for the aid and obliges Brussels to reconsider the file, this time addressing whether Hungary’s no-tender award to the Russian supplier was compatible with EU procurement law. The Commission said it was reviewing the judgment and its next steps. Hungary, for its part, said the investment would proceed. János Bóka, Hungary’s EU affairs minister, indicated Budapest would cooperate with the Commission to show compliance.
Rosatom, Russia’s state nuclear corporation and the project’s industrial sponsor, stated that it would continue to implement Paks II and that its “primary task remains to implement the project in accordance with the highest international safety standards and in full compliance with contractual obligations.”
Rosatom: Why should the Russian nuclear sector be sanctioned? (Part 1)
Hungarian ministers also stressed continuity. Foreign Minister Péter Szijjártó said the judgment “does not slow down” the Paks II expansion and argued that the decision concerns the Commission’s reasoning rather than Hungary’s conduct. Budapest maintains that there is no legal impediment to construction while the Commission re-examines the aid.
Paks II foresees two VVER-1200 reactors—about 1.2 GW each—intended to replace four older units at the Paks site south of Budapest. The scheme stems from a 2014 Hungarian-Russian accord and has experienced delays. Financing has been largely underpinned by a Russian state loan agreed alongside the contract; a 2024 government bill in Budapest contemplated scope to increase the project cost as needed. Earlier Commission communications and industry reporting have placed completion in the early 2030s, subject to permitting and works.
Rosatom: why should the Russian nuclear sector be sanctioned? (Part 2)
Environmental groups welcomed the court’s decision and urged the Commission to ensure that no further public funds flow to the project unless and until EU rules are met. Those demands go beyond the Court’s operative part, which focuses on the adequacy of the Commission’s assessment rather than dictating recovery. Any consequence for payments already made will depend on the Commission’s follow-up and on national implementation.
Procedurally, the ECJ’s annulment means the Commission must reopen the state-aid analysis and, in doing so, check the compatibility of the contract award with public procurement law. Should the Commission conclude that the direct award breached EU rules—or that the aid is otherwise incompatible—it could adopt a new negative decision, potentially prompting recovery; conversely, if shortcomings are addressed or justified, a fresh approval could be granted. Until then, the legal status of the aid turns on the absence of a valid approval decision, a point likely to feature in exchanges between Brussels and Budapest in the coming weeks.
