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2021
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21st July 2021
Consumer, Health & Environment Energy & Transport

Op-Ed: “The importance of being justiciable. The Court of Justice’s ruling in OPAL pipeline (C-848/19 P) and the legal status of the principle of energy solidarity” by Theodoros G. Iliopoulos

On 15 July 2021, the judgment in OPAL pipeline (C-848/19 P) sealed the legal status of the principle of energy solidarity as a justiciable legal criterion that entails rights and obligations both for the European Union and for the Member States, the EU being ‘bound by an obligation of solidarity towards the Member States and the Member States being bound […] between themselves and with regard to the common interest of the European Union’ (paragraph 49). This Op-Ed summarises the factual background of the case, presents the judgment and expresses certain thoughts about its importance.

The Court of Justice, as an appellate body, upheld the General Court’s judgment (T-883/16) that concluded that the principle of energy solidarity, expressed in Article 194(1) TFEU, produces binding legal effects that shall be taken into account in the context of EU energy policy. The General Court accepted Poland’s arguments and annulled the Commission’s decision that conditionally approved the exemption of the Baltic Sea Pipeline Connector (the OPAL pipeline) from the requirements on third-party access and tariff regulation under Directive 2003/55/EC.

The OPAL pipeline was put into service in 2011 and is supplied with gas from Russia by the Nord Stream 1 pipeline, used by Gazprom. It crosses Germany and links Greifswald, close to the Polish border, with Brandov, at the border with Czechia. The Commission had already in 2009 conditionally approved certain exemptions from the requirements on third-party access and tariff regulation that the German authority (BNetzA) had granted for 22 years. But in 2013 Gazprom asked for an amendment of the exemptions and in October 2016 the Commission revised its decision and conditionally approved the amendments proposed by BNetzA. The new regime in essence allowed Gazprom to reserve 50% of OPAL’s capacity, while the remaining capacity would be auctioned and Gazprom, being the dominant market actor, was expected to secure a lion’s share of it. As Advocate General (AG) Campos Sánchez-Bordona noted in his Opinion, this would allow Gazprom to strengthen its position on the gas markets in Central and Eastern Europe. The flows along the OPAL pipeline would be controlled by Gazprom, and the flows through the Yamal pipeline, which crosses Poland, and the Brotherhood pipeline, which crosses Ukraine, Slovakia and Czechia, would diminish.

In December 2016, Poland brought an action for annulment of the foregoing more recent decision, and in 2019 the General Court concluded that the decision had been adopted in breach of the principle of energy solidarity, as the Commission did not take into consideration how the new exemptions would affect the interests of Poland. Germany appealed against the judgment before the Court of Justice.

First, Germany argued that the General Court misinterpreted the principle of energy solidarity as a purely political notion that does not have binding effects for the Commission in itself, but only to the extent that specific secondary law rules implement it. And the applicable Directive only associates energy solidarity with the need to enhance security of supply.

The Court of Justice started its analysis by examining the broader principle of solidarity, a specific expression of which is energy solidarity. It was affirmed that the General Court had correctly noted that solidarity is a fundamental legal principle that underpins the legal system of the EU and it is closely linked to the principle of sincere cooperation (paragraph 41). It was emphasised that primary law contains several references to the principle of solidarity in different fields. And the Court has already invoked it in matters of asylum, immigration and external border controls, as per Article 80 TFEU, to conclude that Member States had failed to fulfil certain obligations and to draw legal consequences (paragraph 42). This remark was also an implicit response to Germany’s argument that the principle cannot be relied on before the courts because of its general and abstract nature. The application of the principle of solidarity in one field of law entails that its application in another cannot be excluded. Besides, as AG Campos Sánchez-Bordona correctly noted in point 111 of his Opinion, some measure of abstraction is a common feature of legal principles and does not rule out their application.

The Court of Justice convincingly concluded that the principle of energy solidarity of Article 194(1) TFEU produces binding legal effects on the Member States and the institutions of the EU, including the Commission. Acts adopted under energy policy must be interpreted and assessed in the light of this principle, independently of how secondary legislation implements it.

Regarding the coverage of the principle of energy solidarity, it was accurately held that it is not limited to ensuring security of supply, which is what Article 36(1)(a) of Directive 2009/73 refers to. AG Campos Sánchez-Bordona eloquently explained in point 104 of his Opinion that increased supply is not necessarily equated to solidarity: ‘if the increase in supply is concentrated in a few States and remains in the hands of a dominant undertaking able to distort competition on that market, it may operate to the detriment of the interests of one or more Member States in an unjustified (non-solidary) fashion’. It should not be disregarded that the legal basis for EU energy policy of Article 194 TFEU lays down four policy objectives: (a) the functioning of the energy market; (b) security of energy supply; (c) energy efficiency and energy saving and the development of new and renewable forms of energy; and (d) the interconnection of energy networks, that shall be pursued expressis verbis in a spirit of solidarity. Thus, the Court of Justice regarded the principle of energy solidarity as ’the basis of all of the objectives of the European Union’s energy policy, serving as the thread that brings them together and gives them coherence’ (paragraph 43).

This cogent conclusion in essence formed the starting point for the analysis vis-à-vis the second ground of appeal. Germany argued that the principle of energy solidarity could not apply, as it is only an emergency mechanism for exceptional circumstances. According to Germany, an obligation to regularly take into account and reconcile all the interests liable to be affected would immeasurably impede or prevent decision-making within the EU. But in arguing so, Germany had misinterpreted the law and misread the judgment under appeal. Indeed, the Court of Justice distinguished the principle of energy solidarity from solidarity as enshrined in Article 222 TFEU, which is only activated in exceptional situations, ‘if a Member State is the object of a terrorist attack or the victim of a natural or man-made disaster’. But the principle of energy solidarity in the energy legal basis is expressed in such a manner that reveals its aim to remedy, but also to prevent crisis situations. Further, its application does not mean that EU energy policy must never negatively impact on the particular interests of a Member State. It only entails a requirement for the EU institutions and the Member States to take the different interests liable to be affected into account and try to balance possible conflicts (paragraphs 68 to 73).

Germany put forward three more grounds of appeal that were rejected as inadmissible or ineffective, and in any case they do not suffice to overturn the above mentioned conclusions regarding the legal status of the principle of energy solidarity, which is the core legal development brought by the judgment.

Indeed, the judgment sealed the principle of energy solidarity as a justiciable legal criterion, and that it is not an emergency mechanism or a mere political declaration. This recognition might accelerate European integration and regularise the application of the principle of solidarity, both as specifically expressed in various fields and as a general, fundamental principle. This means that the adoption of acts or decisions can only be legitimate if the common interest and the different interests of the Member States are taken into account. And there is a link with the principle of proportionality too, in the sense that to the extent that a conflict is noted, the final decision shall be the fruit of a balancing exercise.

However, as important as establishing the justiciability of the principle of energy solidarity is, it is only a first step. In a second step, the standard of assessment when the different interests are taken into account is yet to be shown. For example, should one expect that a decision such as the contested decision of the Commission in OPAL pipeline is to be annulled because of a breach of the principle for example because of an erroneous balancing? Moreover, it is to be shown what the acknowledgement of the legal status of the principle means for the other energy policy objectives of Article 194 TFEU. To give but one example, could certain obligations for intensifying efforts towards an energy transition and relevant legal consequences be inferred from the principle of energy solidarity?

In conclusion, in affirming the legal importance of the principle of energy solidarity, the judgment on appeal in OPAL pipeline paved the way for interesting and important legal developments, and one can only look forward to seeing how its application will shape the EU’s energy policy.

 

Theodoros G. Iliopoulos is a Doctoral Researcher in Energy and Environmental law at Hasselt University and a lawyer (Athens Bar Association).

Contact: theodoros.iliopoulos@uhasselt.be

 

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