Justice should not be blind to something that is obvious to everyone else – An Analysis of Advocate General Bobek’s Opinion in Nord Stream 2
The Nord Stream 2 pipeline is an offshore import pipeline designed to transmit significant volumes of natural gas from Russia to a landing point in Germany. Over the last years, the European Commission has made various attempts to complicate the realization of the Nord Stream 2 project. There were various reasons for the Commission to try to complicate the project, but primarily this was driven by Eastern European and Baltic States to herd off perceived overreliance of the EU on Russian energy imports. First, the Commission argued that the Gas Market Directive applied to offshore pipelines like Nord Stream 2. This would have meant that new regulatory constraints would be imposed on the pipeline with significant impact on the project financing as well as ownership and operation of the pipeline. When the Commission legal service confirmed the academic consensus that this was not the case, the Commission changed its strategy. It suggested that an intergovernmental agreement between the EU and Russia that would extend the application of the ‘principles of EU energy law’ to the pipeline was necessary. When the Council legal service found the key factual claims to be wrong and the legal positions by the Commission untenable, the Commission then suggested that an amendment to the Gas Market Directive was needed. Ultimately, this culminated in the suggested amendment to the Gas Market Directive. By the time the Commission first proposed this amendment, the final investment decision for around EUR 8 billion had been taken and significant investments into North Stream 2 had already been made.
The proposed amendment specifically intended to modify the definition of an ‘interconnector’ under Article 2 of the Gas Market Directive in order to extend the scope of the Gas Market Directive, and all the other instruments of EU energy law that follow, to the border of the territorial sea of the Member State. Prior to this, all gas volumes transported through import pipelines bringing gas to the EU were subject to EU gas market regulation at their landing terminal at the coast. While the physical structures of the pipelines remain unchanged, the legal, operational and economic impacts on affected operators are considerable. However, in practice the number of affected pipeline operators is limited to a single pipeline, Nord Stream 2, due to the derogation regime ushered in the amending Directive.
Nord Stream 2 challenged this amendment before the General Court and asked the Court to annul the amendment in its entirety due to its alleged discriminatory effect. On 20 May 2020, the General Court made an order dismissing the claim. In essence, the General Court did not hear the case on substance as it held that the applicant did not meet the criteria for standing under Article 263 TFEU because the EU act challenged is a directive that requires national implementation (paras. 106 – 108). This in turn, according to the General Court, implies that there is no ‘direct concern’. The applicant brought an appeal against this order. The case in front of the Court of Justice of the European Union (CJEU) hence concerns the standing of an individual applicant to bring a direct action for annulment of a legislative act under EU law. Natural and legal persons have to meet the requirements under Article 263 TFEU in order to establish standing to take direct action before the CJEU. The case at hand concerns a legislative act. For this category of acts, a private person needs to show either that the act is addressed to him or her, or that the act is (otherwise) of (1) direct, and (2) individual concern. In his recently published Opinion in case C-348/20 P, Nord Stream 2 AG v European Parliament and Council of the European Union, Advocate General Bobek stood with the applicant and suggested for the ECJ to accept the applicant’s legal standing. This case note wishes to shed light on Advocate General Bobek’s opinion and consider its broader implications.
The Opinion of the Advocate General focuses on two important and distinct issues of a procedural nature: (1) Can an individual be directly concerned, within the meaning of Article 263 TFEU, by a directive? (2) What considerations should guide the assessment of the admissibility of written evidence produced by the parties in proceedings before the EU Courts, in particular the admissibility of internal documents of the EU institutions?
Advocate General Bobek commences his Opinion by strongly criticising the basic premise of the General Court’s decision: the contested measure cannot be of direct concern to the appellant because it is a directive. This premise, according to the Advocate General, is not only contrary to the established case-law of the CJEU but also excludes the standing of individual applicants in all cases concerning a directive (paras. 35-58). Instead, Advocate General Bobek argues that the amendment to the directive is capable of producing legal effects by extending the scope of application of the latter to situations and addressees not previously caught by this Directive. In light of the fact that the applicant henceforth falls inside the new scope of application its legal position is clearly altered – it became subject to a detailed body of rules, which governs its activities. The question that follows is whether this impact stems from the Directive or the national implementation measures (para. 42).
The General Court excluded direct concern on the ground that the provisions of the amendment required implementing measures at national level (para. 116). The Court’s arguments revolved around the theoretical possibility of applying an exemption under Article 36 of the Gas Market Directive for major new infrastructure or taking advantage of the possibility of a derogation under its Article 49a for pipelines completed before 23 May 2019 (paras. 114-115). These can allow certain qualified infrastructure projects to escape the requirements of EU energy law (including unbundling, third-party access and tariff regulation).
Advocate General Bobek emphasizes that genuine discretion on the part of the national authorities is required in order for these options to have any bearing on the question of direct concern (para. 72). The fact that a directive provides for exemption- or derogation possibilities that an individual undertaking may take advantage of in certain situations does not mean that direct concern is excluded. Whereas these possibilities do give some leeway to national authorities to grant an exemption or a derogation to certain operators, that is not the case in respect of the appellant (para. 75). In that regard, the (in)applicability of those provisions is entirely pre-determined by the EU rules. In this case, the EU legislature decided that (1) the derogation is only applicable to gas transmission lines between a Member State and a third country ‘completed before 23 May 2019’, and (2) the exemption is only available to major infrastructure projects in respect of which no final investment decision has been taken. At the time of the adoption of the amendment (17 April 2019), the Nord Stream 2 pipeline had passed the pre-investment stage, but was not going to be completed, let alone operational, before 23 May 2019 (para. 74). Therefore, the Advocate General finds that these derogations could in any case not be applied to North Stream 2 and accordingly the national implementing authority did effectively not have discretion to apply the derogations.
Whereas the General Court had found a second source of implementation discretion in Article 9 of the Directive, Advocate General Bobek does again not agree with this finding. The amendment had extended the unbundling obligations under Article 9. According to the General Court however the extension did not follow from the amendment, since Member States were allowed to provide two alternatives to full ownership unbundling: the ‘independent system operator’ (ISO) model or the ‘independent transmission operator’ (ITO) model provided for in the Gas Market Directive (para. 91). However, the Opinion correctly notes that the fact that three options are available for unbundling is irrelevant (para. 78). The point is that regardless of the option ultimately chosen by the national authorities, the appellant’s legal position will inevitably be altered, and regardless of the differences between those three models, each requires a transfer of ownership and/or of the operation of the pipeline or part thereof, thus obliging the appellant to alter its corporate structure (para. 80).
Furthermore, the Advocate General specifically notes that the General Court failed to discuss the rules regarding third-party access and tariff regulation as creating a further change to the legal position of Nord Stream 2. By virtue of those provisions, the appellant will, to the extent envisaged by them, be legally precluded from acting as a normal market operator that is free to choose its customers and pricing policy. The appellant will thus face a number of new regulatory constraints that limit its right to property and the freedom to conduct a business (para. 96). Throughout its submissions before the General Court, the appellant consistently referred to the effects from the application of these other rules (para. 87). The General Court acknowledged this but nonetheless rejected the requirement of direct concern by looking only at provisions on unbundling. Had the Court properly assessed the provisions on third-party access and tariff regulation, it would have come to the conclusion that those provisions also directly affect the appellant (para. 92).
Advocate General Bobek then continues to find that not only is the amendment of direct concern to the applicant, it is also of individual concern. The leading case in this area to date is Plaumann, in which the Court explained:
‘[P]ersons other than those to whom a decision is addressed may only claim to be individually concerned if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed.’
The Advocate General applied this test to the case and supported the existence of an individual concern through four central arguments. (1) The appellant is the only company belonging to that (purely theoretical) group of individuals affected by the contested measure (para 194). (2) In light of its factual situation, the appellant was in a unique position vis-à-vis the amendment. In fact, the Opinion notes that it can hardly be disputed that only the appellant was in that position when the measure was adopted. No other company will ever be in that position in the future (para. 196). (3) Not only were the EU institutions aware that, by virtue of the amendment, the appellant was going to be subject to the newly established legal regime, but they acted with the very intention of subjecting the appellant to that new regime (para. 197). (4) Given the advanced stage in the construction of the project and the investment already made at the time of adoption of the amendment, it is evident that the adoption of amendment requires the appellant to introduce profound changes to its corporate and financial structure and to its business model (para. 199).
According to Advocate General Bobek, it follows from this analysis, and from the fact that the conditions for standing under Article 263 TFEU are therefore fulfilled, that the ECJ should set aside the General Court’s Order and declare the action for annulment admissible.
Admissibility of evidence
Interestingly, Advocate General Bobek further criticized that in terms of admissibility of evidence in the case, the General Court blindly relied on the provisions of Regulation No 1049/2001 and refused to consider evidence relating to the objective of the amendment, which eventually led that court to err in law (para. 153). However, more importantly for this case, the Advocate General also suggested that the refused documents are not relevant in showing the true intent of the EU institutions in targeting the appellant as the same information can be found in the public domain (paras. 175 and 178).
It is clear, as the Advocate General Bobek finds, that the extension of the EU Gas Market Directive to the activities of the appellant was the reason that prompted the EU institutions to adopt the amendment. Information to this effect is widely available. The Order from the General Court completely ignores this reality. In the words of Advocate General Bobek: ‘Justice is often depicted as being blind. However, at least in my recollection, that allegory is not meant to be interpreted as Justice being unable to see something that is blindingly obvious to everyone else’ (paras. 197-198).
It is a peculiar suggestion that a Court should ignore what is common knowledge and readily available information. If the Court was restricted to documents permissible under Regulation 1049/2001, the institutions would have it in their hands to only release the documents that suit them (para. 140). Should the only court entitled to fully monitor the EU institutions really be left with the same level of access to information when performing that task as any other Tom, Dick, and Harry? (para.140).
The Court has consistently held that it is possible for an individual to bring an action for annulment against a directive. Despite this recognition, it has been hesitant to accept this in practice. Clearly, what is required in order to meet the high threshold set by the CJEU is that the facts of a case must be highly unusual. Nord Stream 2 AG v European Parliament and Council of the European Union offers just that: a highly unusual case. The actions of EU institutions in this case have been extraordinary.
The strength of the Opinion lies in its practical approach to the case simply and convincingly applying the existing criteria for direct and individual concern based on the facts of the case. Its approach is in stark contrast to the order made by the General Court. The arguments put forward by Advocate General Bobek in favour of admissibility are convincing and it will likely be difficult for the Court to ignore them.
As to the question of admissibility of evidence, one relevant question is whether the Court should ignore the reality and limit itself to reviewing only officially released documents, even when it is clear that the picture painted in those documents does not reflect the reality? Would the Court not just become an enabler to those with political power?
Nice to know that we have common sense lawyers, who can see what the reality is above and beyond the first instance court evaluating the presented evidence (in relation to reality), and second instance courts which do not take and evaluate evidence at all (supposedly portraying reality as a generally known fact).