Accounting principles and methods
A contingent liability is:
The principal contingent liabilities at 31 December 2021 are the following:
For the period 2008 to 2019, EDF was notified of proposed tax adjustments, notably concerning the tax-deductibility of certain long-term liabilities. In two rulings made in 2017 and one in 2019, Montreuil Administrative Court recognised the tax deductibility of these liabilities and validated the position taken by the Company. The Minister appealed against two of these rulings. In January 2020, the Versailles Administrative Court upheld EDF’s position for the year 2008, but the Minister appealed. In a decision of 11 December 2020 the Council of State overturned the Versailles court’s decision and sent the case back before the same court. On 17 June 2021 the Court found against the Company and cancelled the first-instance judgements that had been in its favour. In execution of this decision, EDF paid €374 million in July 2021, and €85 million for the years 2014 and 2015. The Company has lodged an appeal against this decision before the Council of State.
EDF had recognised a net tax liability of €510 million in its 2020 financial statements in connection with this dispute. In view of the above payments, this liability was reduced to €41 million at 31 December 2021.
For the years 2012 to 2019, the French tax authorities notified the Company of certain recurrent tax reassessments concerning the cotisation sur la valeur ajoutée des entreprises (tax on corporate value added) and questioned the deductibility of long term provisions.
Following the tax inspections of EDF International for the years 2009 to 2014, the French tax authorities questioned the valuation of the bond convertible into shares issued to refinance the acquisition of British Energy. The total amount concerned was approximately €310 million. EDF International contested this reassessment.
In judgements of 2 July 2019 for the period 2009-2013 and 30 January 2020 for the year 2014, Montreuil Administrative Court confirmed the tax reassessments. EDF International therefore paid the tax in execution of these decisions, but also appealed against them. In a ruling of 25 January 2022, Versailles administrative court found in favour of EDF International and cancelled the first-instance judgments, thus nullifying the notified reassessments. This ruling has no consequences for the 2021 financial statements, as the total amounts already paid will be refunded to the Company in 2022.
EDF and its subsidiaries are party to a number of labour lawsuits. The Group considers that none of these lawsuits, individually, is likely to have a significant impact on its financial results or financial position. However, because they relate to situations that could concern a large number of EDF’s employees in France, any increase in such litigations could have a potentially negative impact on the Group’s financial position.
Announcements in France in 2010 of a cut in purchase tariffs for photovoltaic electricity (the PV purchase tariff) triggered an upsurge in connection applications submitted to distribution network operators. By a decree of 9 December 2010 (the “moratorium decree”) the French Government suspended the conclusion of new contracts with purchase obligations for a three-month period, and stated that any applications not approved by 2 December 2010 would have to be resubmitted at the end of this three-month period, based on a new tariff. The decision setting that tariff was issued on 4 March 2011, and significantly reduced the PV purchase tariffs. A tender system was developed in parallel.
A ruling given by the French Council of State on 16 November 2011 rejecting appeals against the moratorium decree generated a large volume of legal proceedings against Enedis and EDF in late 2011 which continued through 2012, 2013, 2014 and 2015. Since March 2016, new actions for compensation relating to the photovoltaic moratorium have been definitively barred.
In response to an application for a preliminary ruling, on 15 March 2017 the Court of Justice of the European Union (CJEU) confirmed that the decisions of 10 July 2006 and 12 January 2010 setting the PV purchase tariffs constituted State aid that had been implemented without prior notification to the European Commission, and was therefore illegal. The CJEU concluded that it was now up to the national courts to take the appropriate action.
On 18 September 2019, the Court of Cassation issued several decisions rejecting claims concerning both Enedis and EDF, judging the aid illegal because it had not been notified; consequently, the prejudice of producers who could not benefit from that aid is deemed not legally reparable. Since then, further Court of Cassation decisions have essentially confirmed its ruling of 18 September 2019 and rejected producers’ appeals founded on state aid arguments.
In parallel to the compensation claims before civil courts, EDF and Enedis sought to apply their Civil Liability insurance policy, but the insurers refused their claim. The French Court of Cassation considered in a ruling of 9 June 2015 (for the Green Yellow case) that the insurance payment was due and that the distribution network operator was at fault. Following that ruling, Enedis and EDF brought action against their insurers in April 2017, applying to the courts for formal recognition of two partial serial claims. If the courts were to recognise the existence of two partial serial claims, a single excess and a single limit would apply for all claims with the same technical cause. In view of the favourable developments in cases before the Court of Cassation, EDF and Enedis decided to apply for this case to be removed from the court list on 17 February 2021, to suspend the procedure and draw up the final list of cases still outstanding.
In the crisis caused by the Covid-19 pandemic, some suppliers applied to the President of the Paris Commercial Court in 2020 for an emergency order suspending ARENH deliveries either totally, or partially, equivalent to the decline in electricity consumption by their customer portfolio during the crisis, citing the force majeure clause contained in the master ARENH agreement signed with EDF.
On 20, 26 and 27 May 2020, after summary proceedings the Paris Commercial Court issued provisional rulings on the applications for suspension of ARENH contracts made by four alternative suppliers (Total Energies, Gazel, Alpiq and Vattenfall). The urgent application judge ruled that force majeure was established, and ordered the suspension of deliveries for three of the applicants (Total Energies, Gazel, and Alpiq). EDF appealed against this ruling. On 28 July 2020, the Paris Court of Appeal upheld these Commercial Court decisions. On 24 September 2020 EDF filed an appeal before the Court of Cassation. Total Energies is the only remaining party in the ongoing proceedings.
Meanwhile, as a precautionary measure to protect its rights, on 2 June 2020 EDF notified the energy suppliers Alpiq, Gazel and Total Energies of the termination of their ARENH contracts. By an order of 1 July 2020, the President of the Paris Commercial Court declared this termination null and void. EDF appealed against that decision. On 19 November 2020, the Paris Court of Appeal overturned the Commercial Court’s order and stated that there were no grounds for summary proceedings, thus restoring the effects of the termination.
