Introduction
This paper delves into the principle of energy solidarity and the decision of the General Court that brought this principle to the European Union’s energy policy. By examining Article 194 of the Treaty on the Functioning of the European Union (‘TFEU’), the discussion highlights how energy solidarity has become an essential pillar for ensuring energy security among Member States.
The study focuses on the practical application of this principle, exemplified in the dispute over the OPAL pipeline, showcasing its significance and challenges in the integration and regulation of the European energy market.
Legal Background
The European gas market underwent significant transformations towards competition and standardization in 1998, with further regulatory and institutional adjustments. These changes were prompted by the adoption of common rules for the internal market in natural gas, initially rooted in the internal market provisions of the Treaty establishing the European Community (Art.114 TFEU). The primary objective was to structure gas supply within a competitive framework.
With the Treaty of Lisbon, there was incorporation of an express legal basis for EU energy policy into the Treaty on the Functioning of the European Union. According to Article 194(1) TFEU, EU energy policy is mandated to operate “in a spirit of solidarity,” emphasizing its energy trilemma: i) ensuring the functionality of the energy market, ii) securing energy supply within the Union iii) sustainability related to energy efficiency and the use of renewables form of energy.
The organization of the natural gas industry relies on consumers having the right to choose the supplier, and that implies the need for a competitive market [1]. Non-discriminatory access should only be declined based on capacity limitations or if providing access would hinder gas companies in fulfilling their public service obligations[2].
Ensuring transparency in the regulation of the gas market is an integral aspect of the competitive framework. However, the realization of significant pipeline infrastructure projects may face resistance from gas companies if compelled to grant access to competitors[3]. The open and non-discriminatory access to gas pipelines may pose a challenge to the implementation of new infrastructure, thereby compromising the security of gas supply[4].
To address this potential risk to energy security, the Internal Gas Market Directive[5] introduces an exemption regime in article 36.[6] This regulatory mechanism allows major investments in gas infrastructure to be temporarily exempted from requirements related to third-party access, unbundling, and tariff regulation. This exemption depends on the fact that the investment improves competition and ensures the security of gas supply. Without such exemption, the investment would not be viable.[7] Importantly, the exemption must not undermine the effective functioning of connected gas systems or hinder competition in neighboring markets.
Exemptions are granted on a case-by-case basis by the national regulatory authority of the Member State where the investment occurs. These exemptions may be subject to specific conditions regarding their duration and the access regime governing the pipeline. Notification to the Commission is mandatory[8], and the Commission reserves the right to request amendments or withdrawals of exemption decisions from the national regulator. This framework seeks to strike a balance between promoting competition, ensuring security of gas supply, and preventing potential disruptions in the effective functioning of gas systems and competition in neighboring markets.[9]
Factual Background
The case T-883/16 Republic of Poland v. European Commission revolves around the Ostseepipeline-Anbindungsleitung (OPAL) pipeline, a segment of the Nord Stream 1 pipeline linking the Russian gas system to the EU energy market through the Baltic Sea.
In 2009, the German regulatory authority exempted the entire cross-border capacity of OPAL from third-party access and tariff regulation for 22 years[10]. The Commission, aiming to address possible competition concerns in the Czech gas market, requested modifications to the exemption[11]. The main requests entailed limiting capacity bookings by undertakings holding a dominant position in up or downstream markets for natural gas in Czechia in order to avoid a monopoly of those undertakings also in the Czech mark.
With these modifications, Gazprom, the only company that can operate the pipeline through its entry point, could not reserve more than 50% of OPAL’s transport capacities without offering a specified volume of gas through an open auction procedure. Gazprom, however, failed to establish such a program, resulting in OPAL’s limited use.
In 2016, the German regulator proposed changes aimed at increasing the pipeline’s utilization, suggesting that at least 50% of its capacity be auctioned. The Commission approved the revised exemption with technical adjustments[12] regarding the type and volume of capacity to be up for auction. Criticism arose from Eastern and Central European states, including Poland, who opposed lifting the 50% limit. The concerns centered on redirected gas flows from Ukraine and Poland to Nord Stream/OPAL, potentially increasing gas transport costs to Poland and jeopardizing energy security in the southeast. This shift could impact gas supply diversification to Poland considering the main flow of gas would now come form the Nord Stream/OPAL pipeline with progressive reduced flows from the Yamal-Europe and Brotherhood pipelines.[13]
Legal reasoning of the General Court
Poland contested the 2016 Commission’s decision before the General Court (GC), arguing that it compromised energy security by granting a new exemption and because of that there was a violation of article 36(1)(a) because the exemption would not improve the security of supply. However this plea was dismissed by the Court under the argument that what matters for that disposition is not the exemption but the investment. The Court also stated that the new decision didn’t change the exemption granted in 2009, it rather changed the conditions. Poland also argued that the decision would impact energy solidarity under article 194 TFUE. This claim was successful, and the main assessment of the Court is based on this impact .
The General Court, in considering the Polish arguments regarding energy solidarity, inferred from the expression of “spirit of solidarity” of article 194 TFUE a general principle of the European Union of energy solidarity.[14] The GC recognized the “spirit of solidarity” as a manifestation in the energy sector of the already existing principle of solidarity, being so a foundation of the EU framework, as established in art.4(3) of TEU[15].
By confirming the principle of solidarity as a fundamental principle of the EU and also relying in the interlinkage with the principle of sincere cooperation[16], the GC reasoning was based on the idea that the principle of solidarity can supplement specific norms within particular sectors, thereby creating additional rights and obligations beyond the scope defined in said norms. And because of this, the Court recognized the wording of article 194 TFUE as the energy-specific expression of solidarity, therefore acknowledging a principle of energy solidarity.
The Commission argued that the expression in question is only a political concept addressed to the legislator and not to the administrative body that is applying the legal criterion, and this solidarity would only be in place in situations of crisis in the supply or function of the internal gas market. The Court, however, took this, until the decision, political concept and created a new constitutional level principle in the EU[17].
Significantly, the Court emphasized that within the specific context of the European Union’s energy policy, both the EU and its Member States are obligated to exercise their powers in a manner that avoids adopting measures capable of negatively impacting the interests of the EU and other Member States[18]. This includes considerations related to security of supply, economic and political viability, and the diversification of supply or sources of supply. The Court stressed the need to account for interdependence and de facto solidarity in pursuing these objectives.
Crucially, the Court clarified that the application of the principle of energy solidarity does not imply an absolute prohibition on EU energy policy having negative impacts on a particular Member State’s energy interest[19]. However, it emphasized that both EU institutions and Member States must take into account the interests of the EU and individual Member States, balancing conflicting interests where they arise, and so they have to take the principle in account and not only apply said principle on the basis that the applicable norms already implemented the principle.
The Court determined that the 2016 decision lacked the necessary balancing exercise required by the principle of energy solidarity. The Commission, in modifying the exemption regime, failed to assess the impact on Poland’s energy security and policy. Notably, the Court highlighted the absence of any reference to the principle of energy solidarity in the 2016 decision and emphasized that the decision did not disclose whether the Commission conducted an examination of this principle.
The Court highlighted that the Commission failed to adequately assess the potential rerouting of gas through the Nord Stream 1 and OPAL pipelines, and its implications for Poland[20], especially in relation to the Yamal and Braterstwo pipelines. It emphasized the need for the Commission to consider these impacts in light of the EU’s overall security of gas supply. The Court pointed out the Commission’s oversight in not thoroughly evaluating the medium-term effects on Poland’s energy policy due to the redirection of gas volumes from the Yamal and Braterstwo pipelines to the Nord Stream 1/OPAL route. This lack of comprehensive assessment and failure to balance these impacts against the enhanced security of supply at the EU level was seen as a breach of the principle of energy solidarity by the Commission.[21]
Critical Assessment of the case
The principle of solidarity in the European Union’s legal framework, particularly in the context of energy policy, has gained significant attention and legal scrutiny, as evident in the case of Poland v. Commission.
Solidarity, as a foundational goal and value in the EU, has been omnipresent but lacked clear delineation in its legal contours[22]. This case contributes to defining the principle, emphasizing its normative power for EU integration. However, challenges persist in understanding the enforceability of solidarity and the specific obligations it imposes on both the EU and its Member States.
The judgment establishes that solidarity is not confined to a political concept. Article 194(1) TFUE has been interpreted by scholars as a political guidance and not as imposing an obligation[23], but the Court gives us a broader interpretation and recognizes that the principle extends beyond crises and emergencies, requiring a broader endeavor to avoid harming the energy security interests of others. The Court established this principle as not absolute[24], though the notion of what the interest of the Member States and the EU could entail is not developed by the Court[25]. This is one example of the main issue with the decision, as it seems to lack of clarity in the application of the principle of energy solidarity.
The Court did not specify the way conflicting energy security interests must be reconciled when applying the principle of energy solidarity[26], for instance, it did not clarify whether decisions affecting the interests of others should adhere to a proportionality requirement. Based on this, it is possible to infer that the principle of energy solidarity does not impose a specific outcome but rather necessitates the execution of a balancing test[27]. The ambiguity of the decision connected to the creation of this principle of solidarity can lead to a new interpretation of provisions of Energy Law, because with the new principle is necessary to assure its application in all decisions regarding energy. This means that both national and EU authorities need to consider the interest of other Member-States and EU institutions.
It is true that the principle is not absolute and when applying provisions regarding energy it is possible to hurt a particular interest of a Member State, however, to access what is in a State’s interest and when it is valid to hurt that interest is not clear, even more when there can be envolved multiple types of relevant interests, like economic or political.
The problem becomes even more clear when we talk about which organization interest is relevant because inside a Member State there can be multiple interests[28].
The ambiguity of the decision leads to another issue: the Court’s reasoning and reading of the principle appears to have an excessive formalistic approach[29]. This is based on the fact that the Court seems to make a mechanical application of the principle by not assessing the full content of the Commission’s decision and making the point of concern the fact that the principle of energy solidarity was not mentioned, despite the fact that the Commission, in fact, examined the consequences for other Member States.
According to the Court, the Commission did not do a proper examination of the impact of the new exemption regime — even though the Commission conducted a substantive analysis of the impacts of their decision — because it lacked explicit mention of taking into account the interests of other Member States, namely Poland. This means that decisions that impact national, or EU, energy interests face the potential for annulment if they lack explicit reference to the principle of energy solidarity and fail to articulate how divergent interests have been considered in the decision-making process.
In the absence of a clearly defined framework for evaluating and balancing conflicting interests, there is a potential for decisions to lack the substantive consideration required by the principle of energy solidarity. This ambiguity raises concerns about the effectiveness and meaningful implementation of the solidarity requirement in decision-making processes related to energy security[30].
The judgment of the court can also impact the division of competences between the Member States and the Commission. Adopting a more restrictive interpretation of the decision, it restricts the obligation to consider other interests of Member States or the EU only when exercising rights that originate from EU energy law[31]. This means that the Commission has additional powers and responsibilities to scrutinize national decision-making to make sure that energy solidarity is considered, and by doing so, not only recalibrates the dynamics between Member States and the Commission but also introduces a new layer of oversight and consideration in the implementation of measures tied to EU energy law[32].
Conclusion
In conclusion, the judgment in the Poland v. Commission case significantly contributes to shaping the understanding and application of the principle of energy solidarity within the European Union’s legal framework. The ruling emphasizes that solidarity extends beyond being a mere political concept and establishes it as a normative force crucial for EU integration. However, challenges arise from the lack of clear delineation and enforcement mechanisms for solidarity, leaving room for interpretation and potential inconsistencies in its application.
The judgment’s ambiguity becomes apparent in its failure to specify how conflicting energy security interests should be reconciled under the principle of energy solidarity. While the Court refrains from prescribing a specific outcome, it calls for a balancing test, introducing an element of subjectivity that may complicate decision-making processes. This ambiguity raises concerns about the practical effectiveness and meaningful implementation of the solidarity requirement in addressing energy security issues.
Moreover, the excessive formalist approach adopted by the Court, as evidenced by the criticism of the Commission’s examination in the case, underscores the need for a more nuanced and flexible framework. Decisions impacting energy security that lack explicit reference to the principle of energy solidarity risk potential annulment, creating a legal landscape where adherence to formalities may overshadow substantive considerations.
The judgment also has implications for the division of competences between Member States and the Commission. While the decision could be interpreted restrictively, applying the obligation to consider other interests only to rights originating from EU energy law, it nonetheless grants the Commission additional powers and responsibilities. This introduces a new layer of oversight and consideration in the implementation of measures tied to EU energy law, recalibrating the dynamics between Member States and the Commission.
Peer-Reviewed by:
- Professor Lucila de Almeida, PhD., Abreu Chair in ESG Impact and Professor at NOVA School of Law.
- Beatriz Gomes, Project Manager and Associate Researcher at NOVA Green Lab, Master’s Degree Student specializing in Public Law and Regulation.
References
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Buschle D, ‘Energy Solidarity: Approaching a New Constitutional Principle’ (2021) 10 European Energy & Climate Journal 65
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[1] Art. 32, Internal Gas Market Directive
[2] Art. 35, Internal Gas Market Directive.
[3] Kim Talus, Introduction to EU Energy Law (Oxford University Press 2016), p.39.
[4] Kim Talus, EU Energy Law and Policy: A Critical Account (Oxford University Press 2013), p.97.
[5] Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC.
[6] Tjarda van der Vijver, ‘Third Party Access Exemption Policy in the EU Gas and Electricity Sectors: Finding the Right Balance between Competition and Investments’, Energy Networks and the Law Innovative Solutions in Changing Markets (Oxford University Press 2012), p. 333.
[7] Anatole Boute, ‘The Principle of Solidarity and the Geopolitics of Energy: Poland v. Commission (OPAL Pipeline)’ (2020) 57 Common Market Law Review, p.4.
[8] Anatole Boute, ‘The Principle of Solidarity and the Geopolitics of Energy: Poland v. Commission (OPAL Pipeline)’ (2020) 57 Common Market Law Review, p.3
[9] Dirk Buschle and Kim Talus, ‘One for All and All for One? The General Court Ruling in the OPAL Case’ (2019) 17 Oil, Gas & Energy Law <https://fsr.eui.eu/wp-content/uploads/2020/04/OGEL52019-Buschle-Talus-OPAL-Case.pdf> accessed 12 December 2023, p.2.
[10] This decision was made under the article 22 of Directive 2003/55/EC (2003 Internal Gas Market Directive), this article was replaced by article 36 of Directive 2009/73/EC.
[11] Commission Decision C (2009) 4694 of 12 June 2009.
[12] Commission Decision C (2016) 6950 final on review of the exemption of the OPAL pipeline from the requirements on third party access and tariff regulation.
[13] Anatole Boute, ‘The Principle of Solidarity and the Geopolitics of Energy: Poland v. Commission (OPAL Pipeline)’ (2020) 57 Common Market Law Review, p.7
[14] Case T-883/16 R, Poland v. Commission, para.69.
[15] This perspective is affirmed in the judgment of December 10, 1969, in the case of Commission v France (6/69 and 11/69, not published, EU:C:1969:68), where it was underscored, that solidarity is fundamental to the Union’s framework. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61969CJ0006
[16] Article 4(3) of the Treaty of the European Union.
[17] Dirk Buschle, ‘Energy Solidarity: Approaching a New Constitutional Principle’ (2021) 10 European Energy & Climate Journal 65.
[18] Case T-883/16 R, Poland v. Commission, para.73
[19] Case T-883/16 R, Poland v. Commission, para.77
[20] Case T-883/16 R, Poland v. Commission, para.82
[21] Case T-883/16 R, Poland v. Commission, para.83
[22] Esin Küçük, ‘Solidarity in EU Law’ (2016) 23 Maastricht Journal of European and Comparative Law 965 <https://journals.sagepub.com/doi/abs/10.1177/1023263X1602300604> accessed 29 November 2023, p. 40.
[23] Max Münchmeyer, ‘The Principle of Energy Solidarity: Germany v. Poland’, (2022) 59 Common Market Law Review<https://kluwerlawonline.com/journalarticle/Common+Market+Law+Review/59.3/COLA2022057> accessed 17 December 2023, p.915.
[24] Case T-883/16 R, Poland v. Commission, para.77.
[25] Kim Talus, ‘The Interpretation of the Principle of Energy Solidarity – a Critical Comment on the Opinion of the Advocate General in OPAL’ (Oxford Institute for Energy Studies 2021) <https://www.oxfordenergy.org/wpcms/wp-content/uploads/2021/04/Insight-89-The-interpretation-of-the-principle-of-energy-solidarity-.pdf> accessed 8 December 2023, p.5.
[26]Anatole Boute, ‘The Principle of Solidarity and the Geopolitics of Energy: Poland v. Commission (OPAL Pipeline)’ (2020) 57 Common Market Law Review, p.10.
[27] Dirk Buschle and Kim Talus, ‘One for All and All for One? The General Court Ruling in the OPAL Case’ (2019) 17 Oil, Gas & Energy Law <https://fsr.eui.eu/wp-content/uploads/2020/04/OGEL52019-Buschle-Talus-OPAL-Case.pdf> accessed 12 December 2023, p.5.
[28] Dirk Buschle and Kim Talus, ‘One for All and All for One? The General Court Ruling in the OPAL Case’ (2019) 17 Oil, Gas & Energy Law <https://fsr.eui.eu/wp-content/uploads/2020/04/OGEL52019-Buschle-Talus-OPAL-Case.pdf> accessed 12 December 2023, p.11.
[29]Case T-883/16 R, Poland v. Commission, para.81.
[30]Laura Kaschny, ‘Energy Justice and the Principles of Article 194(1) TFEU Governing EU Energy Policy’ (2023) 12 Transnational Environmental Law 270 <https://www.cambridge.org/core/services/aop-cambridge-core/content/view/AD5833BF76187FE0E475E52BA8CECB08/S2047102523000110a.pdf/energy-justice-and-the-principles-of-article-1941-tfeu-governing-eu-energy-policy.pdf> accessed 5 December 2023, p.292.
[31] Dirk Buschle and Kim Talus, ‘One for All and All for One? The General Court Ruling in the OPAL Case’ (2019) 17 Oil, Gas & Energy Law <https://fsr.eui.eu/wp-content/uploads/2020/04/OGEL52019-Buschle-Talus-OPAL-Case.pdf> accessed 12 December 2023, p.10.
[32] Laura Kaschny, ‘Energy Justice and the Principles of Article 194(1) TFEU Governing EU Energy Policy’ (2023) 12 Transnational Environmental Law 270 <https://www.cambridge.org/core/services/aop-cambridge-core/content/view/AD5833BF76187FE0E475E52BA8CECB08/S2047102523000110a.pdf/energy-justice-and-the-principles-of-article-1941-tfeu-governing-eu-energy-policy.pdf> accessed 5 December 2023, p.290.
