(Corrects dropped letter in spelling of 'subsequently' in paragraph 3)
BRUSSELS, June 5 (Reuters) - French power giant EDF was told on Tuesday it can keep over 1 billion euros in a 15-year-old dispute over alleged state aid, after the European Union's highest court finally ruled against a European Commission claim that the money was illegal state aid.
The case goes back to 1997, when, according to the European Commission, France waived a tax claim on the then wholly state-owned company which was then valued at 888.89 million euros ($1.1 billion).
The Commission subsequently ruled in 2003 that the waiver had strengthened EDF's competitive position in relation to its business rivals and thus constituted improper state aid, and ordered EDF to pay 1.22 billion euros ($1.52 billion) after interest to the French state.
However, in 2009 EDF successfully appealed against the Commission decision to the General Court, the European Union's second highest court, and the French state then returned the 1.22 billion euros to EDF.
The Commission appealed against that decision. But on Tuesday the Court of Justice said that the Commission should have considered whether the French state had acted as a shareholder in EDF in granting the payment waiver - something that would affect the question of whether or not the waiver constituted state aid.
"The Commission erred in law by refusing, simply because the measure was fiscal, to consider whether the French state had acted as a private investor," the Court of Justice said in its statement.
EDF said the decision meant it would keep the money returned to it by the French government in 2009.
"EDF welcomes the decision by the Court of Justice of the European Union, which rejected the European Commission's appeal," the company said in a statement. "EDF is therefore in a position to keep the sum of 1.2 billion euros that the state paid it in December 2009."
EDF's shares were trading down 1.3 percent at 14.93 euros by 1057 GMT on Tuesday. ($1=0.8003 euros) (Reporting By Sebastian Moffett; Editing by Greg Mahlich)