Gas sector faces increased regulatory risk in the EU
Ana Stanič, founder of E&A Law Limited, apposes some of the legislative changes that the Commission of Energy Union has delivered for 2016.
Šefčovič, the Vice President of the Commission in charge of the Energy Union announced last year that 2016 “would be the year of delivery”. So far this year the only thing that the Commission has delivered is proposals for yet more legislative changes. Of these, the key changes for gas are:
- an amendment of Decision 994/2012 to (i) require that IGAs and non-binding instruments relating to energy be approved by the Commission before they can be signed (at present approval is post-ratification) and (ii) enable the Commission to participate in the negotiations of the same.
- an amendment to the Security of Supply Regulation to (i) require Risk Assessments, Preventive Plans and Emergency Plans to be prepared at the regional as well as national levels with 9 regions being proposed (which are different to those established for the purposes of nominating Projects of Common Interest); (ii) prohibit a MS from supplying customers other than its protected customers with gas so long as the protected customers in a neighbouring state are not being supplied by the latter state (the so called “solidarity obligation”); (iii) require mandatory disclosure of contractual information in respect of supply contracts between a gas supplier and a buyer and its affiliates which exceed 40% of the annual gas consumption of a MS; (iv) require companies to provide the Commission with daily, monthly and yearly gas volumes in a non-aggregate form; and (v) extend inter alia the solidarity obligation to countries of the Energy Community Treaty which includes Ukraine, Serbia, and Moldova.
This year has also seen an increase in politicisation of energy issues at the EU level. In particular, there is a worrying tendency of the Council, the Commission and the Parliament to invoke “the objectives of the Energy Union”, as if they are a legal requirement (which they are not) when, by way of example, assessing gas pipeline projects and compatibility of IGAs with EU law. The Oxford Institute of Energy Studies correctly considers this politicisation as potentially “discrediting the EU energy acquis among future investors in infrastructure.”
This is especially so given the Commission’s very aggressive anti-arbitration stance, which further threatens to undermine investment climate in the EU. Its most striking action in this regard is it prohibiting Romania from complying with the Micula international investment arbitration award in the Micula case even though the award is automatically enforceable and resulted in Romania breaching its international law obligations under one of the most-widely accepted treaties in the world.
The Micula brothers have challenged the Commission’s action in the Court of Justice of the EU but the damage to the investment climate in the EU has been done. There is concern that similar actions will be taken to stop enforcement of numerous other arbitrations brought by energy companies against EU Member States in respect of changes in energy legislation in the last few years.
After years of voicing concerns about the increasing regulatory risk in the EU the time has come for the gas industry to take a more proactive approach in ensuring its long-term role in the energy mix in the EU.
About Ana Stanič
Ana is the founder of E&A Law Limited, an innovative law firm which combines energy specialism with expertise in EU law, international law and arbitration. She has advised on concessions to construct large energy infrastructure, privatisations of energy companies, cross-border mergers and acquisitions, and host government agreements to construct pipelines, as well as commercial and investment treaty arbitrations including gas price review arbitrations. Ana will be discussing European pricing at Flame Conference on Monday 9th May at 11:40am and will lead a round table discussion on Regulatory Risk In The EU Gas Markets on 10th May. Find out more here.