Mercer's ZSG Subsidiary Obtains Important State Aid Litigation Victory

Cleary Gottlieb won an important victory for Zellstoff Stendal GmbH when the European Court of First Instance, after six years of litigation, decided to dismiss an appeal against a decision by the European Commission authorizing €250 million in State support for the construction and operation of a €800 million wood pulp mill in Germany. Two other companies using wood for their production had challenged the approval by the Commission, claiming that the Commission should have investigated the matter in more detail in the framework of a formal investigation procedure and that the decision would drive them out of business by raising wood prices in the area.

The Court dismissed the appeal in its entirety and awarded the European Commission and ZSG (who intervened in support of the Commission together with the German government and the state of Saxony Anhalt) recovery of attorney’s fees. The Court held that the appeal was inadmissible in part, and unfounded on substantive grounds for the remainder. The Court confirmed in particular that the Commission had no reason to open an in-depth investigation, since the original notification had provided ample information on the project and its effects on the economy. The original information package had been largely drafted and prepared by the Cleary Gottlieb team.