ECJ: Germany Federal Network Agency must obtain more independence

 In a groundbreaking decision, the European Court of Justice ruled that the german Federal Networg Agency (Bundesnetzagentur) must gain more independence from political directions of the german government. A verdict with far-reaching consequences writes WELT:

Who is allowed to use the electricity and gas lines and when? How much are the transfer fees? How strong and where are the networks being expanded? In Germany, the Federal Network Agency regulates these questions, which are crucial for the energy transition and the supply of German citizens - but not alone.

Politicians had given themselves a say in Paragraph 24 of the Energy Industry Act: Whatever the Bonn regulatory authority decides, has followed strict government guidelines and regulations ever since. But that's over now.

In a groundbreaking ruling, the European Court of Justice (ECJ) ruled that the Federal Network Agency's lack of political independence violates European law. The Luxembourg judges found that the authority must be able to make decisions completely free of federal requirements.

This is the only way to ensure that the authority's decisions are "impartial and non-discriminatory, which precludes the possibility of preferential treatment of companies and economic interests associated with the government, the majority or at least political power." , which accused the federal government of inadequate implementation of European law in a total of four cases.

OPAL: Germany loses appeal; possible repercussions on Nord Stream 2

 As well known, Germany has lodged an appeal against the EUGC decision concerning the quantity of gas passed through the OPAL pipeline. The ECJ rejected this appeal

Handelsblatt writes:

In the dispute over the expansion of Russian gas supplies, Germany suffered a defeat before the European Court of Justice (ECJ). In a judgment published on Thursday, the ECJ rejected Germany's appeal against a decision by the EU court. Specifically, it is about larger delivery volumes through the Opal pipeline, an extension of the first Nord Stream pipeline in the Baltic Sea, which has been in operation since 2011 and through which Russian gas is transported to Europe (Case C-848/19).

Poland had filed a lawsuit against the larger delivery quantities before the General Court of the European Union (EU-G), arguing that they endangered the country's security of supply and violated the principle of energy solidarity. The court upheld the action, whereupon Germany appealed to the ECJ, which has now been rejected.

In September 2019, Poland had a decision by the EU Commission stopped at first instance, which allowed the Russian Gazprom group to make greater use of the Opal pipeline (case T-883/16). Gazprom was originally only allowed to use half the line capacity in order not to put other suppliers at a disadvantage. With a resolution from 2016, the EU Commission allowed Gazprom to significantly increase delivery volumes at the request of the Federal Network Agency. The ECJ has now confirmed that this decision was rightly declared null and void by the EU-G.

A previously published opinion by the Court of Justice stated that Germany "essentially asserts that energy solidarity is merely a political term and not a legal criterion". Accordingly, no direct rights and obligations could be derived from it.

The supreme court of the EU is now contradicting this. Since the principle of solidarity underlies all the objectives of the Union's energy policy, it cannot be assumed that it does not produce any binding legal effects. The principle includes rights and obligations for EU countries.

The impact of the EU General Court's OPAL decision

An interesting view by Alan Riley of the Atlantic Council in the OPAL ruling and its possible impact on Nord Stream 2:

"The OPAL judgment from the European Union (EU) General Court will undermine Gazprom’s market dominance in Central and Eastern Europe.

Case T-883/16 Republic of Poland v. European Commission (hereafter the OPAL case) is likely to have far more impact on European energy policy than just limiting Gazprom’s capacity to export natural gas via Nord Stream 1. In the OPAL case, the judges of the EU General Court established and elaborated a broad principle of energy solidarity drawing upon Article 194(1) of the Treaty on the Functioning of the European Union (TFEU). This principle of solidarity, which will require member states, in all their energy market decisions with a potential cross-border impact, to take into account not only their own interests but also those of other member states and also those of the European Union as a whole, is likely to have a significant impact on the development of European energy law over the next decade. It will no longer be possible for member states to develop energy infrastructure while ignoring the vital interests of other member states. The OPAL case will also provide a basis for the European Commission, member states, and other interested parties to bring legal challenges against those member states who infringe the principle of solidarity.

More immediately, in addition to the OPAL pipeline, the OPAL case is likely to have an impact on Nord Stream 2, potentially making the path to full utilisation of the pipeline much less likely than it previously seemed. The OPAL ruling, for instance, makes it more difficult for Nord Stream 2 to pass the process of security of supply certification required by Article 11 of the Gas Directive 2009. That same directive in Article 36 also imposes significant supply security and competition criteria before an exemption could be granted from its liberalisation requirements. Those requirements will be more difficult to fulfil post-OPAL.

The ruling is also likely to make it more difficult for Nord Stream 2’s owner, Gazprom, to deploy legal mechanisms and corporate structures to avoid the application of EU energy liberalisation law to the pipeline. The OPAL ruling will also bear down on the development of Turk Stream 2. As an import pipeline, it will also be subject to EU law on EU territory, and the local energy regulatory authority will be required to apply EU energy liberalisation legislation in the light of the OPAL ruling.

Overall, the OPAL ruling is likely to make it more difficult for Gazprom to do individual deals that benefit individual member states, but may harm other member states. As a result, Gazprom’s capacity to play one EU member state off against another has been limited by this ruling."

You can read the rest of the piece via the below link:

https://www.atlanticcouncil.org/blogs/energysource/the-principle-of-solidarity-opal-nord-stream-and-the-shadow-over-gazprom/

EUGC sentence in OPAL lawsuit explained

In a lawsuit opposing the European Commission and Poland on the subjects of the internal gas market and the principle of energy solidarity, the EU General Court (the lower court of the European Court of Justice) ruled in favour of Poland in a September 10 2019 sentence.

The litigation began, when Poland disapproved yet another exception from the rules of the EU-gas-directive granted to the pipeline operator of OPAL in Germany.

OPAL (short for: Ostsee-Pipeline-Anbindungsleitung) is the pipeline that takes natural gas from Nord Stream 1 (operating since 2011) at the feeding point in north german Lubmin and forwards it through eastern Germany and to the Czech Republic.

In 2009 the german national regulatory authority Bundesnetzagentur (BNetzA) made a request to the European Commission for two exceptions from stipulations of the EU-gas-directive to the benefit of the operator of OPAL that was not yet completed at that time.

The requested exceptions concerned the rules on third party access and tariff regulation the EU-gas-directive. Underlying is the problematic issue of the respective shares held by the two owners of the OPAL pipeline:  The Opal pipeline is owned by WIGA Transport Beteiligungs-GmbH & Co. (‘WIGA’, previously W & G Beteiligungs-GmbH & Co. KG, previously Wingas GmbH & Co. KG), which owns an 80% share of that pipeline, and E.ON Ruhrgas AG, which owns a 20% share thereof. WIGA is jointly controlled by OAO Gazprom and BASF SE. The company operating the share of the OPAL pipeline belonging to WIGA is OPAL Gastransport GmbH & Co. KG.
The European Commission approved those exceptions.

In 2013 and after that in 2016 the BNetzA requested adaptions to the exceptions granted in 2009 to the operators of the OPAL pipeline that was completed and operating by that time.

The variation proposed by the BNetzA consisted of replacing the restriction imposed by the original decision on the capacity that could be reserved by dominant undertakings and in consequence increase the capacity of the pipeline.

In October 2016, the Commission adopted the exemption of the OPAL pipeline from the requirements on third party access and tariff regulation.

Poland brought legal proceedings against this decision before the EUGC claiming that this decision violates several principles of EU law and international treaties and therefore should be annulled.