Factual and Legal Background
This preliminary reference concerns a dispute between the GSE, the Italian public company that manages inventive mechanisms for promoting renewable sources, and twenty-one energy company owners of renewable power plants, which had benefitted from the green certificate scheme until 2011. Following the transposition of Directive 2009/28/EC (thereon, the RED I) on the promotion of renewable resources, the Italian national legislation replaced the green certificate scheme with another type of incentive, known as the feed-in-tariff scheme. To be able to benefit from the feed-in-tariff, those renewable power plants had to enter a contract with GSE called the GRIN agreement (Gestione Riconoscimento Incentivo).
Different from the green certification scheme, GRIN agreements impose additional obligations on undertakings, such as the mandatory installation of equipment to enable GSE to collect metering data, limitations on the assignment of credits, and GSE’s power to unilaterally alter or terminate incentives if the plant concerned is sold to third parties or due to false or inaccurate data. These changes motivated the undertakings to challenge the legality of the GRIN agreement before the national court. They claimed that the unilateral change of the legal conditions imposed by this agreement violated the objective of the RED I to offer investors a degree of certainty, the principle of the protection of legitimate expectations, and the freedom to conduct business enshrined in Article 16 of the European Charter of Human Rights. The Court of Justice answers in the negative.
The Reasoning of the Court
The Court starts its reasoning by answering whether Articles 1 and 3 of the RED I, read in light of Recitals 8, 14, and 25 thereof, the principle of legal certainty and the protection of legitimacy expectation, must be interpreted as precluding national legislation to replace green certification schemes by the GRIN agreements. While Article 1 of the directive established a common framework for the promotion of renewable energy, Article 3(1) and (2) set targets for Member States, and Article (3)(3) allows them to achieve these targets through the design of a support scheme. Reading Article 3(3) in light of Recital 25, Member States must ensure the proper functioning of these support schemes, which are important means of maintaining investors’ confidence. Said so, the CJEU argues that the need to offer certainty to investors recognized in Recitals 8 and 14 of the RED I cannot, as such, affect the discretion of the Member States to adopt and maintain efficient support schemes (para 38). Therefore, RED I does not ‘preclude the Italian legislature from replacing the green certificates with the incentive feed-in-tariff, bringing to an end, for certain undertakings, the advantage conferred on them by the first scheme and requiring those undertakings to conclude an agreement with GSE’ (para 39).
Second, the Court of Justice moves to interpret whether the Italian legislation complies with the general principles of law, which include the principles of legal certainty and the protection of legitimate expectations. Despite it is for the referring court to assess this compatibility, the present judgment provides guidance on this matter. In particular, the Court recalls that compliance with the principle of legal certainty means twofold: ‘on the one hand, that rules of law be clear and precise and, on the other, that their application be foreseeable by those subject to the law, in particular where they may have adverse consequences’ (para 42). In the present case, the Court finds that the Italian legislation, as well as the provision of the GRIN agreement, appear to set out clearly and precisely the gradual withdrawal of the green certificate scheme and its replacement by the feed-in tariff scheme (para 45). Moreover, and crucially, the CJEU states that applying those provisions was foreseeable for renewable energy producers operating before or after the Italian legislation entered into force (para 48), which undermines the investors’ claim regarding disappointed legitimate expectations. It is worth noting that the Court does not explain how renewable generators could foresee the change in support schemes before the Italian legislation change, particularly for those who invested in those power plants before the RED I.
Third and last, the Court of Justice refers to its precedent in Federazione nazionale delle imprese elettrotecniche ed elettroniche (Anie) and Others to state that the interpretation of Article 16 of the Charter relates to the freedom to conduct a business within the limits of liability for undertakings´ acts, the economic, technical and financial resources at their disposal and the freedom of contract (judgment of 15 April 2021, C‑798/18 and C‑799/18, EU:C:2021:280, paragraphs 56 and 62) (para 62). In the present case, the obligation of the undertakings benefiting from the green certificate scheme to conclude the GRIN Agreement with GSE does not appear to affect that contractual freedom (para 66), nor the undertakings’s right to make free use of the economic, technical and financial resources at their disposal (para 63).
Conclusion
By concluding that the change in the conditions of renewable support scheme agreements does not violate the objectives of RED I concerning investors’s certainty, the principle of legitimate expectations, or the freedom to conduct business, the Court of Justice makes two important statements. On the one hand, it reassures Member States that investors’ disputes concerning changes in renewable support schemes will not necessarily have a claim in law based on EU law; on the other hand, these changes must be justified by the need to ensure the long-term proper functioning of energy markets towards the increasing of renewable energy consumption.
