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Relevant Issues Of Development Of The Energy Law In The European Union: Discussion Concerning The Nord Stream-2 Project (Part 2)
 
PIIS231243500022027-7-1
DOI10.18572/2410-4390-2018-3-86-92
Publication type Article
Status Published
Authors
Ivan V. Gudkov 
Occupation: Assistant Professor of the Department of Legal Regulation
Affiliation: MGIMO University
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 3
Pages86-92
Abstract

The Nord Stream 2 offshore pipeline project favored by a range of the key West European members of the European Union (hereinafter referred to as the “EU”) and their major energy companies has been facing political opposition of the European Commission (hereinafter referred to as the “Commission”), which is supporting the loudly articulated criticism of the position shared by a group of the Baltic and Eastern European states. [1] The political opposition has been expressed in various statements and calls lacking, however, legal impact and being unable to prevent practically the construction of the respective infrastructure. Considering the circumstance, the Commission is trying to exert a regulatory impact on the project so that the relations regarding the project operation are within the area of its influence enabling it to participate in determining the parameters of the project functioning. The part of the study published in Energy Law Forum journal, 2018, issue №, summarizes the key conclusions articulated by the EU institutions’ legal agencies in the course of checking the Commission’s initiatives related to the Nord Stream 2 project. This part of the study reviews the EU laws’ outlooks to cover the cross-border gas pipelines. To ensure such reach of the EU regulations, the European Union’s signing of international agreements with third-party states regarding particular gas pipelines or changing of the EU’s current energy legislation are the possible options. Presently, the Commission is promoting an initiative to amend the current EU energy law to cover all gas pipelines originating from third countries. This article expresses the author’s personal opinion and does not represent an official view of any institution or organization.

Keywordsenergy law; energy law of the European Union, international legal regulation, gas pipeline, Nord Stream 2
Received06.08.2018
Publication date30.09.2018
Number of characters22929
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Table of contents

The EU laws’ outlooks to cover the crossborder gas pipelines.
The non-compliance with the criteria of “moderateness and self-limitation”.
The breach of the UN Convention on the Maritime Law.
The breach of the non-discrimination principle.
The bill entails the risk of discrimination in the following forms.
The breach of the investment protection standards.
Less efficient regulation of energy relations by the international law.
Neglect of third countries’ position.
1

The EU laws’ outlooks to cover the crossborder gas pipelines.
2 The Commission’s initiatives have for their main objective ensuring the propagation of the EU energy laws (and of the associated law enforcement powers of the European Union) to cover the cross-border gas pipelines connecting the EU with third countries.
3 To ensure such propagation of the EU regulations, the European Union’s signing of international agreements with third-party states regarding particular gas pipeline projects or changing of the EU current energy laws are the possible options.
4 The first “agreement” option requires common approval from the EU member states of a dedicated international agreement regarding a particular project, as well as, which is of no less importance, the consent of the third country.
5 An attempt to use this option for the Nord Stream 2 regulation failed due to the lack of the required approval on the part of both the EU and Russia. In addition, the necessity and the proportionality of the international agreement had not been proved for its declared objective of ensuring the reliability of energy supply.
6 So, presently the Commission is following the second path promoting an initiative to amend the current EU energy law to cover all gas pipelines originating from third countries.
7 Even if the geographical reach of such changes was limited to the EU territory, they would have practically impact the extraterritorial offshore cross-border gas pipelines, since offshore cross-border gas pipelines constitute from the standpoint of law integral indivisible objects, and the application of the EU regulations to their particular sections located within the European Union would have had an impact on the objects and persons based beyond the EU. This is the difference from the onshore crossborder gas pipelines, which often represent legally segmented objects with their parts located in different states, held/managed by different entities, and governed by the different law of the respective hosting states. Thus, the extraterritorial effect of the EU regulations would have manifested itself in an obligation for the operators of the cross-border gas pipelines established n third countries to comply with the EU’s requirements on the division and certification, despite the fact that the main part of the infrastructure they operate is located beyond the EU territory.
8 The extraterritorial reach of the EU energy law regulations to cover the offshore cross-border gas pipelines would have involved a conflict of the laws of the EU and the laws of the third countries or, at least, a conflict of their jurisdictions.
9 According to the Commission’s design, the means to eliminate a respective conflict would differ depending on whether the cross-border gas pipelines are the existing or new ones.
10 For the existing cross-border gas pipelines, the EU member states may, at their discretion, issue individual clearances with regard to the applications of the EU regulations, i.e. a conflict may be possibly resolved “in favor” of the third country’s jurisdiction.
11 Regarding the new cross-border gas pipelines, a conflict may be eliminated through the issue of individual exemptions with their parameters to be determined by the Commission or by the EU’s signing of the respective international agreements with third countries reflecting the “key principles of the EU energy laws”. At the same time, the second option is the only one legally possible for the projects which are at an active investment phase.
12 Consequently, it would be correct to argue that, regarding the new cross-border gas pipelines, the Commission allows the conflict resolution on the “EU terms” only.
13 The political motives underlying the Commission’s willingness to obtain such regulatory leverage to influence third countries are well known. Having no legal opportunity to prevent the construction of the politically “unwanted” gas pipeline projects, the Commission is willing to get an opportunity, at least, to influence determining of their operation terms and conditions and “bargain” with third countries for concessions regarding various issues of commercial and investment cooperation.
14

For instance, regarding the cooperation with Russia in the field of energy, the Commission has repeatedly stated that lifting of the monopoly on pipeline gas exports is desirable together with an expanded access for the EU investors to the Russian natural resources production sector, [1] and, starting from 2014, it has been insisting on the long-term preservation of the transit of the Russian gas through the territory of Ukraine. [2]
15 The idea to “interrelate” the mutual investment terms and conditions is expressly reflected in clause 22 of the preamble of the EU Third Gas Directive, describing the criteria to be taken into account in certification of operators of foreign-owned gas transmission systems in the EU territory. The clause specifies that the security of the energy supplies to the EU (a prerequisite for the certification) “requires… an assessment of the treatment of both domestic and foreign trade and investment in energy in a … third country” and further it is said that “the Commission is encouraged to submit recommendations to negotiate relevant agreements with third countries addressing the security of supply of energy to the EU”.

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1. See, for example: Speech of Commissioner Oettinger at the South Stream event. Brussels, 25 May 2011 // http://eeas.  europa.eu/archives/delegations/russia/documents/news/20110525_en.pdf
2. Brussels to Blow the Ukrainian Pipes. The European Commission is Opposed to Gazprom’s New Projects // Kommersant. July 16, 2015.
3. Talus K., Wustenberg M. Risks of Expending the Geographical Scope of EU Energy Law // European Energy and Environmental Law Review. October 2017.
4. Lissek U. Regulation of Nord Stream 2: Rule of Law, Equal Treatment and Due Process. A View from The Project Developer // CEPS Commentary. November, 2016. Barnes A. Dispelling the regulatory myths about Nord Stream 2. Presentation to the European Gas Conference. 22.01.2016. // http://www.theenergyexchange.co.uk/wp-content/  uploads/2016/01/Alex-Barnes-Gazprom.pdf Offenberg P. The European Neighborhood Policy and the EU’s Security of Supply with Natural Gas. // Jacques Delors Institute. January, 2016. S. 17–20.
5. Separate opinion of Judge Sir G. Fitzmaurice, para. 70 // http://www.icj-cij.org/files/case-related/50/050-19700205-  JUD-01-04-EN.pdf
6. Case C-264/09 European Commission v. Slovak Republic. Judgment of the Court (First Chamber) of 15.11.2011 OJ. C 319/2 [2011]
7. Gudkov I.V. Judgement of the EU Court on Case “Commission v. Slovakia”: Good News for Russian Investors in the European FEC // All Europe. 2011. № 10 (59).
8. Gudkov I.V. European Union’s Competence to Regulate Relations in the Sphere of Energy // International Economic Law. 2016. № 1.

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