Case C‑718/18
European Commission
v
Federal Republic of Germany
Judgment of the Court (Fourth Chamber), 2 September 2021
(Failure of a Member State to fulfil obligations – Internal markets for electricity and natural gas – Directive 2009/72/EC – Article 2(21) – Article 19(3), (5) and (8) – Article 37(1)(a) and (6)(a) and (b) – Directive 2009/73/EC – Article 2(20) – Article 19(3), (5) and (8) – Article 41(1)(a) and (6)(a) and (b) – Concept of a ‘vertically integrated undertaking’ – Effective unbundling of networks from the activities of production and supply of electricity and natural gas – Independent transmission operator – Independence of the staff and the management of the transmission system operator – Transitional periods – Shares held in the capital of the vertically integrated undertaking – National regulatory authorities – Independence – Exclusive powers – Article 45 TFEU – Freedom of movement for workers – Charter of Fundamental Rights of the European Union – Article 15 – Right to engage in work and to pursue an occupation – Article 17 – Right to property – Article 52(1) – Restrictions – Principle of democracy)
1. Approximation of laws – Measures of approximation – Common rules for the internal market in electricity – Directive 2009/72 – Common rules for the internal market in natural gas – Directive 2009/73 – Vertically integrated undertaking – Concept – Effective separation of transmission system operation from production and supply activities – Interpretation encompassing activities carried on outside the European Union
(European Parliament and Council Directive 2009/72, Art. 2(21); European Parliament and Council Directive 2009/73, Art. 2(20))
(see paragraphs 32-40, 44)
2. Approximation of laws – Measures of approximation – Common rules for the internal market in electricity – Directive 2009/72 – Common rules for the internal market in natural gas – Directive 2009/73 – Independence of the staff and the management of the transmission system operator – Persons who have held a professional position in a vertically integrated undertaking – Applicable transitional periods – Freedom of movement for workers – Free choice of occupation – Limitations
(Art. 45 TFEU; Charter of Fundamental Rights of the European Union, Arts 15(1) and 52(1); European Parliament and Council Directive 2009/72, Art. 19(3) and (8); European Parliament and Council Directive 2009/73, Art. 19(3) and (8))
(see paragraphs 53, 54, 56, 59-68)
3. Approximation of laws – Measures of approximation – Common rules for the internal market in electricity – Directive 2009/72 – Common rules for the internal market in natural gas – Directive 2009/73 – Independence of the staff and the management of the transmission system operator – Employees of the transmission system operator – Prohibition against holding any interest or receiving any financial benefit from a vertically integrated undertaking – Right to property – Limitations
(Charter of Fundamental Rights of the European Union, Arts 17(1) and 52(1); European Parliament and Council Regulation 2009/72, Art. 19(5); European Parliament and Council Directive 2009/73, Art. 19(5))
(see paragraphs 76, 77, 79, 81-84)
4. Approximation of laws – Measures of approximation – Common rules for the internal market in electricity – Directive 2009/72 – Common rules for the internal market in natural gas – Directive 2009/73 – Regulatory authorities – National legislation conferring on the executive power of the Member State certain powers reserved exclusively for regulatory authorities – Procedural autonomy of Member States – Compliance with EU law – Principle of democracy of the European Union – Executive powers
(European Parliament and Council Directive 2009/72, Art. 37(1)(a) and (6)(a) and (b); European Parliament and Council Directive 2009/73, Art. 41(1)(a) and (6)(a) and (b))
(see paragraphs 105, 112, 113, 115, 116, 119, 123-126, 130-133)
Résumé
The purpose of Directives 2009/72 (1) and 2009/73 (2) is to provide all EU consumers with a real choice in domestic electricity and natural gas markets. In order to avoid discrimination, the directives provide for the effective separation of transmission networks from activities of generation and supply (‘effective unbundling’). Compliance with the provisions of the directives is ensured through the creation of independent, impartial and transparent national regulatory authorities (‘NRAs’).(3)
By its judgment, the Court of Justice upholds, in its entirety, the action for failure to fulfil obligations brought by the European Commission against the Federal Republic of Germany. The four complaints put forward by the Commission in support of its action all relate to the incorrect transposition by the Federal Republic of Germany of several provisions of Directives 2009/72 and 2009/73 into the Energy Industry Act.(4)
Findings of the Court
The Court upholds the first complaint, by which the Commission claims that the Federal Republic of Germany failed to transpose correctly into national law the concept of a ‘vertically integrated undertaking’ (‘VIU’), by restricting its definition to activities carried on within the European Union.(5) The Court points out that the concept of a ‘VIU’ is an autonomous concept of EU law which does not impose any territorial restriction and must be interpreted in the light of the concept of ‘effective unbundling’ in order to avoid a risk of discrimination as regards network access. There may be conflicts of interest between a transmission system operator located in the European Union and electricity or natural gas producers or suppliers carrying on activities in those fields outside the European Union. A broad interpretation of the concept of a ‘VIU’ may encompass, where appropriate, activities carried on outside the European Union. That does not imply an extension of the European Union’s regulatory power. Consequently, the Federal Republic of Germany’s restrictive interpretation of the concept of a ‘VIU’ is not in line with the objectives pursued by those provisions.
In the context of the independence of the staff and the management of the transmission system operator, the Court upholds the second complaint, by which the Commission submits that the German legislation limits the application of the provisions of the directives concerning transitional periods – which relate to persons changing posts within the VIU – to those parts of the VIU which carry on their activities in the energy sector.(6) The Court points out that those provisions of the directives do not contain any such restriction. Such a restriction would be contrary to the objective of ‘effective unbundling’, which is necessary to ensure the functioning of the internal energy market and the security of energy supply. Under the provisions of the directives, transitional periods apply to persons responsible for the management and/or members of the administrative bodies of the transmission system operator who, before their appointment, held a position in the VIU or in one of the VIU’s controlling shareholders, even if that position was not held in the VIU’s energy sector or in an undertaking which is the controlling shareholder of one of VIU’s energy sector undertakings.
In response to an argument by the Federal Republic of Germany relating to the freedom of movement for workers and the fundamental right to pursue a freely chosen occupation, the Court observes that freedoms are not absolute rights and may be restricted under certain conditions, as is the case here. The Court concludes that the scope ratione personae of the German law is contrary to the provisions of the directives at issue.
The Court upholds the third complaint, by which the Commission submits that the provisions of the directives prohibiting the holding of certain interests in or receipt of financial benefits from any part of the VIU have been transposed only in part into the German legislation, and do not apply to shareholdings of the transmission system operator’s employees, (7) even though it is clear from the wording of the provisions that those prohibitions also apply to employees. That interpretation is supported by the objective of ‘effective unbundling’ and by the risk that employees who do not participate in the day-to-day management of the transmission system operator may nevertheless be able to influence the activities of their employer, with the result that situations of conflicts of interests could arise if those employees hold shares in the VIU or in parts thereof. In response to an argument by the Federal Republic of Germany relating to the right to property of employees, guaranteed by Article 17(1) of the Charter of Fundamental Rights of the European Union, the Court observes that the prohibitions in the relevant provisions do not constitute such a disproportionate and intolerable interference with that right as to impair its very substance.
The Court upholds the fourth complaint, by which the Commission claims that the Federal Republic of Germany disregarded the powers exclusively reserved to NRAs under the directives, by attributing to the Federal Government, under the German legislation, the power to determine the methodologies used to calculate or establish the conditions for access to national networks, including the applicable tariffs.(8) The Court points out that NRAs must be completely independent in order to ensure impartiality and non-discrimination towards economic actors and public entities. It observes that the procedural autonomy of Member States must be exercised in accordance with the objectives and obligations laid down in the directives. In particular, tariffs and calculation methodologies for both national and cross-border exchanges must be determined on the basis of uniform criteria, such as those laid down by the directives and other EU legislative acts.
In response to the Federal Republic of Germany’s argument that Article 24 of the Energy Industry Act is legislative in nature, the Court emphasises that the functioning of the European Union is founded on the principle of representative democracy and, in particular, that directives are adopted under the legislative procedure. Moreover, the Court stresses that the principle of democracy does not preclude the existence of public authorities outside the classic hierarchical administration and more or less independent of the government. The independent status of NRAs does not in itself deprive those authorities of their democratic legitimacy, since they are not shielded from all parliamentary influence.(9)
The Court points out that the powers reserved to the NRAs are executive powers that are based on technical and specialist assessment, and do not confer upon those authorities a margin of discretion which might entail decision-making of a political nature. The Court notes that, in the present case, the NRAs are subject to principles and rules established by a detailed legislative framework at EU level.