Analysis of EU energy market and examples of legal agency and disputes Brussels, 5 October, 2015 1
About us Becker Büttner Held has been operating since 1991. At BBH, lawyers, auditors and tax advisors work hand in hand with the engineers, consultants and other experts of our BBH Consulting AG. We provide advice to more than 3,000 clients and are the leading law firm for the energy and infrastructure industry. BBH is known as the law firm of public utilities. But we are far more than that in Germany and also in Europe. The decentralised utilities, the industry, transport companies, investors as well as political bodies, like the European Commission, the Federal Government, the Federal States and public corporations appreciate BBH s work. Accredited professionals: ca. 250; total staff: ca. 550 Offices in Berlin, Munich, Cologne, Hamburg, Stuttgart and Brussels 2
Dr. Dörte Fouquet Dr. Dörte Fouquet is specialized in EU law and international legal relations, with focus on competition, infrastructure, energy and environment. She is legal advisor to companies, finance institutions, associations, governmental agencies in Germany and other EU Member States, EU institutions and on international level. Studies of Law at the Universities of Marburg and Hamburg 1982 Research assistant, University of Hamburg 1988 Ministry for the Environment and Energy, Hamburg 1991 Liaison office of Hamburg and Schleswig-Holstein to the European Commission in Brussels 1993 Partner at law firm Kuhbier, Brussels Since 2011 Partner at BBH Brussels Rechtsanwältin / Lawyer Partner 1000 Brussels, Belgium Avenue Marnix 28 Phone +32 (0)2 204 44-12 doerte.fouquet@bbh-online.be 3
Agenda Internal Energy Market - Liberalization State intervention in the energy market State vs. Investor Position of the European Commission Anti-dumping and anti-subsidies protection 4
Internal Energy Market Liberalization Example: Art. 1 Directive 2009/72/EC: This Directive establishes common rules for the generation, transmission, distribution and supply of electricity, together with consumer protection provisions, with a view to improving and integrating competitive electricity markets in the Community. It lays down the rules relating to the organisation and functioning of the electricity sector, open access to the market, the criteria and procedures applicable to calls for tenders and the granting of authorisations and the operation of systems. It also lays down universal service obligations and the rights of electricity consumers and clarifies competition requirements. 5
Internal Energy Market Liberalization Principles: Free competition, with access for all undertakings on nondiscriminatory basis Prices in principle to be determined solely by the market Exception: natural monopolies in the grid published tariffs, applicable to all eligible customers and applied objectively and without discrimination between system users Subject to prior approval by the regulator Unbundling between grid and supply (i.e. non-market and market activities) Independent regulator to watch over the energy market 6
State intervention in the energy market Example :Art. 3(2) Directive 2009/72/EC: Having full regard to the relevant provisions of the Treaty, in particular Article 86 thereof, Member States may impose on undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate to security, including security of supply, regularity, quality and priceo f supplies and environmental protection, including energy efficiency, energy from renewable sources and climate protection. Such obligations shall be clearly defined, transparent, nondiscriminatory, verifiable and shall guarantee equality of access for electricity undertakings of the Community to national consumers. 7
State intervention in the energy market The CJEU on state intervention Federutility criteria Proportionality test Intervention must be limited in duration reexamined after a time Method not go beyond what is necessary really target the problem Non-discriminatory between customers and this may mean treating different groups of customers differently Plus: clearly defined, transparent, non-discriminatory, verifiable and shall guarantee equality of access 8
State intervention in the energy market Note also: Art. 107 TFEU: Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. 9
State intervention in the energy market Normally it is the role of the European Commission to ensure that Member States comply with those rules Infringement procedures against several Member States Both State aid investigations (e.g. Spain) and Internal Energy Market rules (e.g. Poland) Companies can Complain to the European Commission But no guarantee that the Commission starts investigations Or start national proceedings Possibly going to the CJEU through preliminary questions (e.g. France) 10
Investor vs. State The Energy Charter Treaty International agreement (52) signatories Focus: the protection of foreign investments, based on the extension of national treatment, or most-favoured nation treatment (whichever is more favourable) and protection against key non-commercial risks; non-discriminatory conditions for trade in energy materials, products and energyrelated equipment based on WTO rules, and provisions to ensure reliable cross-border energy transit flows through pipelines, grids and other means of transportation; the resolution of disputes between participating states, and - in the case of investments - between investors and host states; the promotion of energy efficiency, and attempts to minimise the environmental impact of energy production and use. 11
Investor vs. State Example: Art. 10 Energy Charter Treaty: Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party. 12
Investor vs. State Energy Charter Treaty in principle allows investors to proceed against host States Dispute resolution through arbitration Several cases, e.g. against Spain, against Czech Republic Question: how does that sit in proceedings between investors from Member States against Member States? Shouldn t it normally be the European Commission? 13
Position of the European Commission European Commission considers Energy Charter Treaty nonapplicable in proceedings against Member States (implicit disconnection clause) Respectively seems to argue that former tariffs may have been illegal state aid then corrected by new law, an argument apparently used in cases against the Czech Republic Also, any award under arbitration to compensate the investor could be seen as new state aid itself Amicus Curiae in several proceedings AES vs. Ungarn, ICSID-Case No. ARB/07/22; Electrabel vs. Ungarn, ICSID-Case No. ARB/07/19, Micula vs. Rumänien; Antin vs. Spain, ICSID Case No. ARB/13/31 und Eiser vs. Spain, ICSID Case No. ARB/13/36 BUT: Arbitration tribunals consider Energy Charter Treaty applicable 14
Position of the European Commission Practical example -Case Micula Romania maintained- prior to accession to EU certain custom exemptions Micula brothers benefited from that In accession negotiations custom exemptions abolished Micula brothers sued under bilateral investment treaty Arbitration tribunal ordered Romania to pay 82 million Euro damages Commission argued though involuntarily this would be State aid and prohibited the payment Case now before the General Court (T-646/14)! 15
The Vattenfall speciality In 2009 Vattenfall vs. Germany under the Energy Charter Treaty provision (Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany (ICSID Case No. ARB/09/6)) at the World Bank s International Centre for the Settlement of Investment Disputes (ICSID) Causa: environmental restrictions imposed on a 2.6 billion coal-fired power plant being under construction along the banks of the Elbe River. Claim: EUR 1.4 billion 11.03.2011 - Parties settle by agreement embodied in an award by consent Germany paid, standards were lowered The EU Commission did not intervene as amicus curiae! 16
Position of the European Commission The latest: Vattenfall vs. Germany- ICSID Case No. ARB/12/12 Vattenfall Sweden et al. 2012 initiated arbitration proceedings under the Energy Charter Treaty against Germany - Reason: Germany decided to speed up the nuclear phase-out Request: 4,7 billion Euro damages! European Commission in September 2015 joined as «amicus curiae» Was asked by the Tribunal to submit its observations Likely Commission finally to defend its position that against Member States Energy Charter Treaty non-applicable also in the Vattenfall domain 17
Anti-dumping and anti-subsidies protection European Commission to protect European industry from unfair competition from outside the EU in the context of WTO Agreements dumping introduction of a product into the commerce of another country at less than its normal value See GATT 1994 (Anti-dumping Agreement) subsidies - (i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit See WTO SCM Agreement 18
Anti-dumping and anti-subsidies protection Example: PV panel dispute June 5, 2013: Interim anti-dumping and anti-subsidies duties imposed against Chinese undertakings importing PV panels into the EU and selling them below normal value August 3, 2013: Commission accepts undertaking Chinese producers agree to sell above Minimum Import Price (MIP) anti-dumping and anti-subsidies duties not effectively charged December 5, 2013: Definite anti-dumping and anti-subsidies duties imposed (duration: 2 years) ( undertaking confirmed for definite anti-dumping and anti-subsidies duties) 19
Anti-dumping and anti-subsidies protection Example: PV panel dispute May 5, 2015: Partial Interim Review relating to the level of the MIP (duration: 15 months) May 29/30, 2015: Anti-circumvention Review (duration: 9 months) if circumvention confirmed, then extension of the anti-dumping and antisubsidies duties to Taiwan and Malaysia possible (manufacturers from Taiwan and Malaysia to contact the Commission within 37 days) June 5, 2015: Commission withdrew undertaking for three Chinese producers anti-dumping and anti-subsidies duties to be effectively charged August 19, 2015: Commission withdrew undertaking for another Chinese producer anti-dumping and anti-subsidies duties to be effectively charged 20
Anti-dumping and anti-subsidies protection Example: PV panel dispute December 7, 2015: Anti-dumping and anti-subsidies duties supposed to end (if no Expiry Review started) Note: Community producers may make request to Commission to commence Expiry Review Measures will remain in force with review pending 21
Thank you very much for your attention. 22