Vereniging voor Energie, Milieu en Water ea (Energy) [2005] EUECJ C-17/03 (07 June 2005)

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(Internal market in electricity - Preferential access to the system for cross-border transmission of electricity - Undertaking previously responsible for the operation of services of general economic interest - Long-term contracts existing prior to the liberalisation of the market - Directive 96/92/EC - Principle of non-discrimination - Principles of the protection of legitimate expectation and of legal certainty)

REFERENCE under Article 234 EC for a preliminary ruling by the College van Beroep voor het bedrijfsleven (Administrative Court for Trade and Industry) (Netherlands), by decision of 13 November 2002, received at the Court on 16 January 2003, in the proceedings concerning:

Nederlands Elektriciteit Administratiekantoor BV, previously Samenwerkende Elektriciteits Produktiebedrijven NV,

composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas (Rapporteur), Presidents of Chambers, J.-P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, M. Ilešič, J. Malenovský and U. Lõhmus, Judges,

having regard to the written procedure and further to the hearing on 29 June 2004,

- Vereniging voor Energie, Milieu en Water, by I. VerLoren van Themaat and M. het Lam, advocaten,

- Nederlands Elektriciteit Administratiekantoor BV, by J. de Pree and Y. de Vries, advocaten,

- the Finnish Government, by T. Pynnä and A. Guimaraes-Purokoski, acting as Agents,

- the Commission of the European Communities, by H. Støvlbæk, M. van Beek and A. Bouquet, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,

1 The reference for a preliminary ruling concerns, first, the interpretation of Article 86(2) EC and, second, that of Article 7(5) of Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) (-�the Directive-�).

2 This reference has been submitted in the context of a dispute between, on the one hand, the undertakings Vereniging voor Energie, Milieu en Water, Amsterdam Power Exchange Spotmarket BV and Eneco BV and, on the other, the Directeur van de Dienst uitvoering en toezicht energie (the Director of the Service for Implementation and Control of Energy Supply) (-�the DTE-� or -�the controller of system management-�) relating to the latter-�s decision to reserve, on a preferential basis, a portion of the capacity of the cross-border system for the importation of electricity into the Netherlands to Nederlands Elektriciteit Administratiekantoor BV (-�NEA-�), which, at the time when the dispute in the main proceedings arose, was known as Samenwerkende Elektriciteits Produktiebedrijven NV (-�the SEP-�).

3 The Directive marks the second phase in the liberalisation of the market in electricity within the European Community. According to recital (2) in its preamble, its objective is to complete a competitive internal market in electricity.

4 Recital (4) in the preamble to the Directive provides: -�-� establishment of the internal market in electricity is particularly important in order to increase efficiency in the production, transmission and distribution of this product, while reinforcing security of supply and the competitiveness of the European economy -�-�.

5 Recital (5) states that: -�-� the internal market in electricity needs to be established gradually, in order to enable the industry to adjust in a flexible and ordered manner to its new environment and to take account of the different ways in which electricity systems are organised at present-�.

6 Recital (25) in the preamble to the Directive provides as follows: -�-�each transmission system must be subject to central management and control in order to ensure the security, reliability and efficiency of the system in the interests of producers and their customers; -� a transmission system operator should therefore be designated and entrusted with the operation, maintenance, and, if necessary, development of the system; -� the transmission system operator must behave in an objective, transparent and non-discriminatory manner-�.

7 The final recital in the preamble to the Directive provides: -�-� this Directive constitutes a further phase of liberalisation; -� once it has been put into effect, some obstacles to trade in electricity between Member States will nevertheless remain in place; -� therefore, proposals for improving the operation of the internal market in electricity may be made in the light of experience -�-�.

8 Article 7, which features in Chapter IV of the Directive, entitled -�Transmission system operation-�, provides as follows:

-�1. Member States shall designate or shall require undertakings which own transmission systems to designate, for a period of time to be determined by Member States having regard to considerations of efficiency and economic balance, a system operator to be responsible for operating, ensuring the maintenance of, and, if necessary, developing the transmission system in a given area and its interconnectors with other systems, in order to guarantee security of supply.

2. Member States shall ensure that technical rules establishing the minimum technical design and operational requirements for the connection to the system of generating installations, distribution systems, directly connected consumers-� equipment, interconnector circuits and direct lines are developed and published. These requirements shall ensure the interoperability of systems and shall be objective and non-discriminatory. ...

3. The system operator shall be responsible for managing energy flows on the system, taking into account exchanges with other interconnected systems. To that end, the system operator shall be responsible for ensuring a secure, reliable and efficient electricity system and, in that context, for ensuring the availability of all necessary ancillary services.

5. The system operator shall not discriminate between system users or classes of system users, particularly in favour of its subsidiaries or shareholders.

9 The first sentence of Article 16 of the Directive, which features in Chapter VII, entitled -�Organisation of access to the system-�, provides that, for such organisation, Member States may choose between negotiated access and the single buyer procedure. The second sentence of Article 16 states that -�[b]oth sets of procedure shall operate in accordance with objective, transparent and non-discriminatory criteria.-�

-�1. Those Member States in which commitments or guarantees of operation given before the entry into force of this Directive may not be honoured on account of the provisions of this Directive may apply for a transitional regime which may be granted to them by the Commission, taking into account, amongst other things, the size of the system concerned, the level of interconnection of the system and the structure of its electricity industry. The Commission shall inform the Member States of those applications before it takes a decision, taking into account respect for confidentiality. This decision shall be published in the Official Journal of the European Communities.

2. The transitional regime shall be of limited duration and shall be linked to expiry of the commitments or guarantees referred to in paragraph 1. The transitional regime may cover derogations from Chapter[s] IV, VI and VII of this Directive. Applications for a transitional regime must be notified to the Commission no later than one year after the entry into force of this Directive.-�

11 Under Article 2 of the Elektriciteitswet of 16 November 1989 (Netherlands Law laying down rules for the generation, import, transmission and sale of electricity) (Staatsblad 1989, p. 535) (-�the 1989 EW-�) a company designated for that purpose (-�the designated company-�) had been given the task, in conjunction with the licensees, of ensuring the reliable and efficient public distribution of electricity at costs which were to be as low as possible and justified in the light of the public interest.

12 Under Article 34 of the 1989 EW, only the designated company was authorised to import into the Netherlands electricity intended for public distribution.

13 Under Article 35 of the 1989 EW, that company was not authorised to enter into contracts for the importation of electricity intended for public distribution without the approval of the competent minister. The latter could refuse to grant approval only if the interest of proper supply of electricity and electrical energy so required.

14 The designated company within the terms of Articles 2, 34 and 35 of the 1989 EW was the SEP, the rights of which were assumed by NEA with effect from 1 January 2001.

15 The Elektriciteitswet of 2 July 1998 (the Netherlands Law laying down rules for the generation, import, transmission and sale of electricity) (Staatsblad 1998, p. 427) (-�the 1998 EW-�) was designed to transpose the Directive and repealed the 1989 EW with effect from 1 July 1999.

16 Following the entry into force of the 1998 EW, the SEP transferred operation of the high-voltage network to its subsidiary TenneT BV (-�TenneT-�). Ownership of that network was transferred in 2001 to Saranne BV (-�Saranne-�), which was also a subsidiary of the SEP. Also in 1991, the State acquired ownership, first, of TenneT and, subsequently, of Saranne.

17 Under Article 16 of the 1998 EW TenneT has among its tasks those of establishing and maintaining the network, ensuring that it is reliable and secure, guaranteeing a sufficient reserve capacity and supplying to third parties electricity imported into the Netherlands and exported from the Netherlands to other countries.

18 Under Article 24 of the 1998 EW the network operator must ensure that access to it is available to generators, intermediaries, suppliers and purchasers of electricity under non-discriminatory conditions.

19 Supervision of the operation of the network and of the network operator is, pursuant to the 1998 EW, entrusted to the DTE. In hierarchical terms, the DTE is subject to the Minister for Economic Affairs, who may issue to the DTE both individual and general instructions.

20 Pursuant to, in particular, Article 36 of the 1998 EW, the DTE is required to determine, on a proposal by the network operator, the conditions governing access to that network.

21 To that end, the DTE adopted, by decision of 12 November 1999, the conditions governing operation of the system for the cross-border transmission of electricity (-�the System Code-�).

22 Under, inter alia, Articles 5.6.4 and 5.6.7 of Chapter 5 of the System Code, for 2000 an electricity import capacity of 1 500 MW of the 3 200 MW available on cross-border lines was reserved on a preferential basis for the SEP for the transmission of electricity which was the subject of purchase contracts signed by the SEP in accordance with Article 35 of the 1989 EW.

23 In issue are three contracts for the purchase of electricity which the SEP concluded with a view to fulfilling its task under Article 2 of the 1989 EW.

- in 1989 with Électricité de France for the purchase of 600 MW per annum until 31 March 2002 and of 750 MW per annum from 1 April 2002 to 31 March 2009;

- in 1989 with Preussen Elektra AG for the purchase of 300 MW per annum up to 31 December 2005;

- in 1990 with Vereinigte Elektrizitätswerke Westfalen AG for the purchase of 600 MW per annum up to 31 March 2003 (these three contracts, taken together, are hereinafter referred to as -�the international contracts of the SEP-�).

25 Next, the preferential allocation to the SEP of an annual capacity for the cross-border transmission of electricity for the period after 2000 was expressly regulated by the Overgangswet elektriciteitsproduktiesektor (Transitional Law on the electricity generating sector) of 21 December 2000 (Staatsblad 2000, p. 607) (-�the Overgangswet 2000-�).

-�The system operator of the national high-voltage grid shall, on request, allocate to the designated company a maximum of 900 MW until 31 March 2005 and a maximum of 750 MW from 1 April 2005 to 31 March 2009 for the transmission of electricity where such transmission serves to implement the agreements concluded in 1989 and 1990 between the designated company, of the one part, and Électricité de France, Preussen Elektra AG and Vereinigte Elektrizitätswerke Westfalen AG, of the other part, in the version thereof in force on 1 August 1998 and in so far as those agreements are still in force. -�-�

The dispute in the main proceedings and the questions referred for preliminary ruling

27 The claimants in the main proceedings lodged an administrative objection to the adoption of Chapter 5 of the System Code by the DTE.

28 By decision of 17 July 2000 the DTE dismissed that objection. It recognised that the preferences granted to the SEP constituted obstacles to the proper functioning of the electricity market. It also stated that meaningful competition on the market for the generation of electricity in the Netherlands is still extensively limited, so much so that competition can in practice operate only by means of electricity generated outside the Netherlands. It pointed out in this context that the available capacity for cross-border transmission is 3 200 MW and that increasing the latter would be expensive. From this it concluded that a reservation for the outstanding period of the international contracts of the SEP would involve a serious restriction on import possibilities and thus on trade in electricity for other market operators.

29 The DTE, however, justified its decision rejecting the complaint by taking the view that the contracts in question were long-term ongoing contracts concluded by the SEP in accordance with the legislation in force at the time and pursuant to a service of general economic interest within the terms of Article 86 EC. Furthermore, the 1998 EW did not, it found, contain any provision capable of casting doubt on the validity of those contracts, with the result that those contracts had in principle to be performed. Interruption of the existing contracts would amount to unacceptable interference with the legal certainty of the parties and would also constitute a significant financial loss. In addition, performance of those contracts would not take up all of the international transmission capacity.

30 The claimants in the main proceedings brought an action against the decision of the DTE before the College van Beroep voor het Bedrijfsleven. They submitted that that measure had been taken in breach of Articles 28 EC, 81 EC, 82 EC and 86 EC and was contrary to the principle of non-discrimination laid down in Article 7(5) of the Directive and Article 24 of the 1998 EW and to the principles of non-discrimination and objectivity. That decision, they continued, also ignored the interest in promoting the development of trade on the market in electricity within the terms of Article 36 of that Law. The claimants also submitted that the method for attribution of the System Code had to be classified as a -�technical regulation-� and ought, for that reason, to have been brought to the knowledge of the Commission, in accordance with Council Directive 83/189/EEC of 28 March 1983 laying down a procedure for the provision of information in the field of technical standards and regulations (OJ 1983 L 109, p. 8).

31 In those circumstances, the College van Beroep voor het bedrijfsleven decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

-�I.(a) Can Article 86(2) EC be invoked to justify continuing to grant a company which was formerly entrusted with the operation of services of general economic interest and which entered into certain commitments in connection with such operation a special right to enable it to honour those commitments after the particular task assigned to it has been completed?

(b) If this question is answered in the affirmative, is a rule which provides for the preferential allocation for a period of ten years of half to a quarter (declining over time) of the cross-border transmission capacity for electricity to the undertaking concerned nevertheless invalid because it

2. affects trade to such an extent as would be contrary to the interests of the Community?

II.(a) Is Article 7(5) of the -� Directive to be interpreted as meaning that the prohibition of discrimination contained therein is restricted to the requirement that the system operator must not draw any distinction in granting access to the system by means of technical rules?

If so, is an allocation method relating to the cross-border transmission capacity of electricity to be regarded as a technical rule within the meaning of the abovementioned provision?

(b) In the event that the allocation method must be regarded as a technical rule or in the event that Article 7(5) of the -� Directive is not limited to technical rules, is a rule under which preferential cross-border transmission capacity is made available for contracts concluded in connection with a particular public task compatible with the prohibition of discrimination contained in that article?-�

32 By its second question, which it is appropriate to examine first, the national court is seeking in substance to ascertain whether the prohibition of discrimination laid down in Article 7(5) of the Directive precludes measures such as Articles 5.6.4 and 5.6.7 of the System Code and Article 13(1) of the Overgangswet 2000 (hereinafter -�the measures in issue-�), which allocate to the SEP, on a priority basis, a part of the capacity for the importation of electricity so as to enable it to fulfil its obligations under the international contracts which it concluded at the time when it was entrusted with the task of ensuring the reliable and effective operation of the public distribution of electricity at costs which were as low as possible and justified in the light of the public interest.

33 It should first be noted that Article 7(5) of the Directive refers to the system operator of the national electricity transmission system (judgment of 14 April 2005 in Joined Cases C-128/03 and C-129/03 AEM and AEM Torino [2005] ECR I-0000, paragraph 56). While it would appear that the System Code established by the DTE cannot be attributed to the Netherlands operator of the electricity grid (TenneT), the fact none the less remains that the national court is questioning the Court of Justice as to the scope of that provision.

34 Within the framework of the cooperation between the Court and national courts and tribunals established by Article 234 EC, it is solely for the national court to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. The Court can refuse a request submitted by a national court only where it is quite obvious that the ruling sought by that court on the interpretation of Community law bears no relation to the actual facts of the main action or its purpose or where the problem is general or hypothetical (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraphs 59 to 61, Case C-369/95 Somalfruit and Camar [1997] ECR I-6619, paragraphs 40 and 41, and Case C-36/99 Idéal tourisme [2000] ECR I-6049, paragraph 20).

35 It appears, in the case in the main proceedings, that the system operator took specific measures by refusing system access to at least one of the claimants in the main proceedings (Eneco NV), pursuant to Article 5.6.4 or Article 5.6.7 of the System Code. The national court was for that reason justified in forming the view that the interpretation of Article 7(5) of the Directive is necessary for the purpose of resolving the dispute in the main proceedings. It is therefore appropriate to interpret that provision in the light of Articles 5.6.4 or 5.6.7 of the System Code.

36 To the extent to which the dispute in the main proceedings relates to State measures that are not attributable to the system operator, reference should also be made to Article 16 of the Directive. It follows from Article 16 that although, for the organisation of access to the system, Member States may choose between the negotiated access procedure and the single buyer procedure, both sets of procedure must be operated in accordance with objective, transparent and non-discriminatory criteria (AEM and AEM Torino, cited above, paragraph 57). Article 16 of the Directive thus prohibits Member States from organising access to the system in a discriminatory manner.

37 Article 13(1) of the Overgangswet 2000, which provides that for the year 2001 et seq. the system operator is to grant the SEP priority access to the network for cross-border transmission of electricity, was introduced after the application in the main proceedings had been brought. It is for that reason necessary to examine that provision in relation to the principle of non-discrimination set out in Article 16 of the Directive.

38 So far as concerns the scope of Article 7(5) of the Directive, that provision does not, according to the claimants in the main proceedings, merely cover technical rules but also prohibits measures such as those here in issue.

39 The Netherlands, French, Finnish and Norwegian Governments, together with the Commission, also submit that Article 7(5) of the Directive does not apply solely to technical rules. They take the view, however, that the measures in issue do not amount to discrimination prohibited by that provision.

40 By contrast, according to NEA, in view of the fact that the other paragraphs of Article 7 of the Directive deal with those technical rules, the inference should be drawn that paragraph (5) itself refers only to technical rules. As the measures in issue are not capable of being described as technical rules, they do not, NEA submits, come within the scope of Article 7(5) of the Directive.

41 In interpreting a provision of Community law, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part (see, inter alia, Case 292/82 Merck [1983] ECR 3781, paragraph 12; Case 337/82 St. Nikolaus Brennerei [1984] ECR 1051, paragraph 10; and Case C-223/98 Adidas [1999] ECR I-7081, paragraph 23).

42 In the first place, Article 7(5) of the Directive is couched in general terms which prohibit -�[all discrimination] between system users or classes of system users-�. The wording of that provision does not therefore contain any indication which argues in favour of a restrictive interpretation limited to technical rules.

43 Second, it follows from the context of Article 7 of the Directive that paragraph (5) thereof cannot be limited to technical rules. Article 7(2) already provides that technical rules must not be discriminatory. If the rule on non-discrimination set out in Article 7(5) were limited to technical rules, that provided for in Article 7(2) would serve no purpose.

44 Third, with regard to the objectives of the Directive, recital (25) in the preamble thereto states, without setting out any limitation in regard to technical rules, that a system operator must behave -�in an objective, transparent and non-discriminatory manner-�.

45 In the light of the foregoing, it must be concluded that Article 7(5) of the Directive is not limited to covering technical rules but must be interpreted as applying to all discrimination.

46 The same conclusion must be drawn in regard to Article 16 of the Directive. The rule on non-discrimination laid down in that article is couched in general terms and must be read in the light of Article 3(1) of the Directive, under which Member States are required to refrain from all discrimination in regard to the rights and obligations of electricity undertakings.

47 On the question as to whether the measures in issue amount to discrimination contrary to the Directive, it should be borne in mind that the provisions of the Directive, which require that the action of the system operator and that of the State in creating access to the system should not be discriminatory, are specific expressions of the general principle of equality (see AEM and AEM Torino, paragraph 58; see also, by analogy, in regard to the second subparagraph of Article 40(3) of the EC Treaty (now, after amendment, the second subparagraph of Article 34(2) EC), Case C-280/93 Germany v Council [1994] ECR I-4973, paragraph 67, and, in the matter of defence against dumped imports from non-member countries, the judgment of 27 January 2005 in Case C-'422/02 P Chemi-Con (Deutschland) v Council [2005] ECR I-'0000, paragraph 33).

48 The prohibition of discrimination, which is one of the fundamental principles of Community law, requires that comparable situations are not treated differently unless such difference in treatment is objectively justified (see, inter alia, Germany v Council, cited above, paragraph 67).

49 Under the measures in issue, priority allocation was granted to the SEP in 2000 in respect of 1 500 MW of the available 3 200 MW of cross-border capacity for electricity transmission, corresponding to 47% of the available capacity. The maximum capacity reserved for NEA on a priority basis from 2001 to 31 March 2009 is 750 MW, in accordance with Article 13(1) of the Overgangswet 2000, which corresponds to 23.4% of available capacity. As Eneco NV has stated, without being challenged on this point, its request for capacity to import electricity was turned down by TenneT pursuant to the measures in issue and it was for that reason unable to supply the electricity which it had undertaken to provide to its customers following the liberalisation of the market. As a result, Eneco NV argues, those in competition with the SEP were placed at a significant economic disadvantage, particularly in view of the fact that, as emerges from the order for reference, competition in the supply of electricity in the Netherlands is in practice able to operate only by way of electricity generated outside that Member State.

50 It is common ground that priority access, such as that granted to the SEP and subsequently to NEA, to the network for the cross-border transmission of electricity pursuant to measures such as those here in issue amounts to differential treatment.

51 NEA, however, supported in substance by the Netherlands and French Governments, avers that its situation is not comparable to that of the other operators. The international contracts of the SEP were concluded at a time when the latter was the owner of the high-tension network and the interconnectors. Those contracts, NEA submits, were concluded within the framework of the performance of a task of general economic interest based on the 1989 EW and the object of which was to ensure electricity supply in the Netherlands for purposes of resale at reasonable prices.

52 Prior to the liberalisation of the electricity market in the Netherlands, the SEP was indeed the only undertaking authorised to import electricity and entrusted with the task of general economic interest which consisted in ensuring the reliable and efficient operation of the public distribution of electricity at costs that were as low as possible and justified in the light of the public interest.

53 However, by reason of the liberalisation of the market as a result of the transposition of the Directive, the SEP lost its import monopoly. That import market was opened to other competing operators. At the same time, since the entry into force of the 1998 EW, the SEP has no longer been entrusted with the aforementioned task.

54 It is for that reason necessary to verify whether the difference in treatment consisting in the priority access granted to the SEP, and subsequently to NEA, to the network for the cross-border transmission of electricity pursuant to the measures in issue is justified in the light of the Directive.

55 NEA, together with, essentially, the Netherlands and Norwegian Governments, submits that such a difference in treatment is justified on the ground that the SEP was required to conclude those long-term contracts in performance of its task. Characterised by a high fixed cost and a relatively low price per MW, those contracts, it is argued, would severely penalise NEA if it were unable to import the quantities of electricity contemplated, in view of the absence of adequate capacity on the network for cross-border transmission. That, NEA contends, justifies a certain capacity on that network being reserved for NEA on a priority basis.

57 In order to tone down some of the consequences of liberalisation, the Directive provides, in Article 24, for the possibility of applying a transitional regime under certain conditions. Under that provision Member States may seek derogations from, inter alia, Chapters IV and VII of the Directive, which contain Articles 7 and 16 respectively, in the case where commitments or guarantees of operation given before the entry into force of the Directive may not be honoured on account of its provisions.

58 In view of the existence of that specific provision for dealing with individual situations arising out of the legal context existing before the Directive entered into force, the existence, or otherwise, of discrimination within the terms of Articles 7(5) and 16 of the Directive has to be appraised without any regard being had to those individual situations.

59 In accordance with Article 24 of the Directive, applications for a derogation had to be submitted by Member States no later than one year after the Directive entered into force. Article 24 also provides that the decision was to be a matter for the Commission, which, for that purpose, had to take into account, inter alia, the size and level of interconnection of the system concerned, as well as the structure of the electricity industry in the State in question. Prior to taking a decision, the Commission also had to inform the Member States of those applications, the Member States thereby having the possibility of notifying their position to the Commission. Finally, any derogations within the terms of Article 24 had to be of limited duration and be linked to the expiry of the commitments or guarantees in question.

60 The Kingdom of the Netherlands could have had recourse to Article 24 of the Directive for the purpose of requesting, in good time, a temporary derogation from Articles 7(5) and 16 thereof in favour of the SEP in the form of a request to be allowed to allocate to that undertaking, on a priority basis, part of the capacity for the cross-border transmission of electricity. It did not, however, do so, as it submitted, and only after the expiry of the prescribed period, merely a request for compensation in respect of a portion of the financial losses which would be incurred by the SEP by reason of the performance of the international contracts concluded for its previous public service task (see point 44 of Commission Decision 1999/796/EC of 8 July 1999 concerning the application of the Netherlands for a transitional regime under Article 24 of Directive 96/92/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity (OJ 1999 L 319, p. 34)). The Kingdom of the Netherlands thus did not request authorisation in regard to the measures in question and the Commission was unable to authorise the measure which the Kingdom of the Netherlands had envisaged as it was notified outside the time-limit.

61 The procedure, criteria and limits set out in Article 24 of the Directive would be rendered meaningless if it were to be accepted that a Member State may unilaterally, and without complying with that procedure, apply differing treatment to electricity importers on grounds that are precisely capable of justifying, under Article 24 of the Directive, a derogation from Articles 7(5) and 16 thereof.

62 In the first place, any other interpretation would risk jeopardising, contrary to the objective of the Directive, the transition from a monopolistic and compartmentalised market in electricity to one that is open and competitive. By the effect of the measures in question, the access of new operators to the market would be significantly imperilled, even blocked, and the position of the undertaking previously holding the monopoly in the Netherlands could be protected against competition from other operators beyond the possibilities which the Community legislature envisaged in the Directive for the purpose of reconciling the completion of the electricity market with the safeguarding of commitments entered into under the previous legislation.

63 Second, the system of derogations provided for in Article 24 of the Directive is designed, inter alia, to ensure equal treatment for undertakings previously holding a national monopoly and which find themselves in a situation such as that of NEA. Equal treatment of this kind could be compromised if it were accepted that each Member State could, outside of the procedure and conditions laid down in Article 24 of the Directive, confer an advantage on the undertaking previously holding its monopoly in order to safeguard performance of the long-term contracts which that undertaking concluded prior to the liberalisation of the electricity market. That would run counter to the objective of the Directive set out in recital (12) in its preamble, according to which -�whatever the nature of the prevailing market organisation, access to the system must be open in accordance with this Directive and must lead to equivalent economic results in the States and hence to a directly comparable level of opening-up of markets and to a directly comparable degree of access to electricity markets-�.

64 The Netherlands Government, however, submits that the provisions of Articles 3(3) and 17(5) of the Directive, which allow the system operator, in certain circumstances, to refuse access to the system, demonstrate that the reservation of some cross-border electricity transmission capacity is not necessarily at variance with the principle of non-discrimination. A similar line of reasoning is developed by the Finnish Government, which refers to Articles 8(2) and 17(5) of the Directive, as well as by the Norwegian Government and the Commission, which also make reference to Articles 17(5) and 3(3) of the Directive.

65 Article 3(3) of the Directive allows Member States to derogate, under certain conditions, from Articles 5, 6, 17, 18 and 21 of the Directive. It does not apply to Article 7 or to Article 16 of the Directive. Article 3(3) of the Directive cannot therefore be relied on to justify a derogation from Articles 7(5) and 16 thereof.

66 Article 17(5) of the Directive provides that the system operator may refuse access to the system where it lacks the necessary capacity and that duly substantiated reasons must be given for such a refusal. However, in the light of what is stated in paragraphs 56 to 63 of this judgment, priority access based on the existence of contracts concluded before the Directive entered into force and granted outwith the procedure provided for in Article 24 of the Directive cannot be regarded as justified.

-�Without prejudice to the supply of electricity on the basis of contractual obligations, including those which derive from the tendering specifications, the dispatching of generating installations and the use of interconnectors shall be determined on the basis of criteria which may be approved by the Member State and which must be objective, published and applied in a non-discriminatory manner which ensures the proper functioning of the internal market in electricity. They shall take into account the economic precedence of electricity from available generating installations [or] interconnector transfers and the technical constraints on the system.-�

68 That provision does not limit, either directly or indirectly, the scope of the principle of non-discrimination set out in Articles 7(5) and 16 of the Directive. It cannot therefore be successfully relied on.

69 Nor, in that connection, can reliance be successfully placed on the final recital in the preamble to the Directive, referred to by the Commission, which states that the Directive constitutes merely a further phase in the liberalisation of the electricity market and will leave some obstacles to trade in electricity between Member States. As it is worded in a very general manner, that recital cannot justify derogations from Articles 7(5) and 16 of the Directive.

70 The same holds with regard to recital (5) in the preamble to the Directive, which is relied on by NEA and provides that the internal market in electricity has to be established gradually. The gradual nature of liberalisation follows from the fact that the market was to be opened to large-scale consumers alone in 2000, to medium-sized consumers in 2002 and, finally, to all consumers in 2004. This gradual character is also reflected in the transitional and derogating provisions of Article 24 of the Directive. Recital (5) cannot, however, form the basis for derogations from Articles 7(5) and 16 of the Directive.

71 It follows that priority access to a portion of the capacity for the cross-border transmission of electricity conferred on an operator by reason of commitments assumed before the Directive entered into force, but without compliance with the procedure set out in Article 24 of the Directive, must be regarded as being discriminatory within the terms of Articles 7(5) and 16 of the Directive and as therefore being contrary to those articles.

72 NEA and the Finnish Government point out, however, that an operator such as NEA is entitled to perform the international contracts of the SEP by reason of the principles of the protection of legitimate expectations and of legal certainty.

73 The principle of the protection of legitimate expectations is unquestionably one of the fundamental principles of the Community (see, inter alia, Case C-104/97 P Atlanta v European Community [1999] ECR I-6983, paragraph 52, and Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I-6945, paragraph 70).

74 It is settled case-law that any trader on the part of whom an institution has promoted reasonable expectations may rely on the principle of the protection of legitimate expectations. However, if a prudent and circumspect trader could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot plead that principle if the measure is adopted (see, inter alia, Atlanta v European Community, cited above, paragraph 52, and Di Lenardo and Dilexport, cited above, paragraph 70).

75 In the present case, the Community institutions did not adopt any measure or assume any form of conduct which could have pointed to the maintenance of the legislative situation in force in 1989 and 1990, under which the international contracts of the SEP were concluded.

76 In particular, although, in its judgment in Case C-157/94 Commission v Netherlands [1997] ECR I-5699, it dismissed the Commission-�s action for a declaration that, as the law stood prior to the entry into force of the Directive, there had been a breach of Article 37 of the EC Treaty (now, after amendment, Article 31 EC) by Netherlands legislation, in casu the 1989 EW, which granted the SEP exclusive rights to import electricity, the Court did not in any way guarantee that the legislative situation at Community level would remain unchanged.

77 Moreover, the Directive is merely the second stage in a process which it was stated would lead to liberalisation of the market in electricity, the first stage having been marked by Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids (OJ 1990 L 313, p. 30). According to the first recital in the preamble to Directive 90/547, the European Council recognised, at its successive meetings, the need for a single internal market in energy. Furthermore, in its Communication COM (89) 336 final of 29 September 1989 on increased intra-community electricity exchanges: a fundamental step towards completing the internal energy market, which accompanied the draft of Directive 90/547, the Commission contemplated the possibility that the networks for the transmission of electricity reserved for national or regional monopolies should be made available to third parties and it regarded it as necessary that import and export monopolies be removed (see points 2 and 52 of that communication).

78 It cannot therefore be argued that the Community institutions created well-founded expectations on the part of the SEP that a monopoly for the importation of electricity into the Netherlands would be maintained or that the SEP would be allowed to enjoy a preferential right to use the network for the cross-border transmission of electricity until the expiry of the international contracts which had been entered into.

79 Admittedly, the public authorities in the Netherlands did adopt a national legislative framework within which the SEP concluded international contracts for the purpose of performing its task of general economic interest designed to ensure the reliable and efficient operation of the distribution of electricity at costs as low as possible and justified in the light of the public interest. A Member State cannot, however, bind the Community in such a way that the latter is unable to undertake or pursue the liberalisation of the market in electricity.

80 With regard to the principle of legal certainty, this requires in particular that rules involving negative consequences for individuals should be clear and precise and their application predictable for those subject to them (see, to this effect, Case 325/85 Ireland v Commission [1987] ECR 5041, Case C-143/93 Van Es Douane Agenten [1996] ECR I-431, paragraph 27; and Case C-63/93 Duff and Others [1996] ECR I-569, paragraph 20).

81 As the Court has already ruled, an individual cannot place reliance on there being no legislative amendment whatever, but can only call into question the arrangements for the implementation of such an amendment (see, with regard to a legislative amendment removing the right to deduct value added tax in respect of certain costs connected with lettings of immovable property, Joined Cases C-487/01 and C-7/02 Gemeente Leusden and Holin Groep [2004] ECR I-5368, paragraph 81). In like manner, the principle of legal certainty does not require that there be no legislative amendment, requiring as it does, rather, that the legislature take account of the particular situations of traders and provide, where appropriate, adaptations to the application of the new legal rules.

82 It is in this regard important to stress that the Directive contains provisions which allow account to be taken of the special situations of traders such as the SEP within the context of the liberalisation of the market in electricity. The Directive offered Member States, in particular in Article 24, the possibility of applying for a derogation from Articles 7(5) and 16 with regard to operating commitments or guarantees granted before the Directive entered into force. The Kingdom of the Netherlands did not avail itself of that possibility (see point 44 of Decision 1999/796).

83 The Commission stresses that there is no obligation in the Directive to revoke contracts such as the international contracts of the SEP. That situation, however, does not authorise breach of the rules of the Directive on the ground that such breach is necessary in order to honour those contracts. Furthermore, revocation of those contracts would merely be an indirect and potential consequence of the Directive. The Directive also does not prevent an operator such as the SEP (which became NEA with effect from 2001) from selling, outside the Netherlands, electricity which it has undertaken to purchase pursuant to its international contracts.

84 NEA also invokes Regulation (EC) No 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity (Text with EEA relevance) (OJ 2003 L 176, p. 1), in particular point 2 under the heading -�Position of long-term contracts-� in the annex to that regulation, which provides that -�[e]xisting long-term contracts shall have no pre-emption rights when they come up for renewal-�. According to NEA, it follows from that provision that it must be possible to honour contracts concluded before that regulation entered into force.

85 That argument cannot alter the appraisal made up to the present point. That provision of Regulation No 1228/2003, which was not in force at the time of the facts which gave rise to the dispute in the main proceedings, is entirely consistent with the interpretation of Articles 7(5) and 16 of the Directive set out in paragraphs 56 to 63 of this judgment and cannot therefore be brought into question. It merely confirms in this case that any derogations from those articles which may be granted pursuant to Article 24 of the Directive cannot extend beyond the duration of the commitments assumed in contracts concluded before the Directive entered into force.

86 Those findings do not prejudge the reply to the question as to whether and to what extent an undertaking such as NEA may, on the basis of national law, seek to recover compensation for loss which it may have incurred by reason of the choice made by the Netherlands authorities not to seek a derogation under Article 24 of the Directive in respect of the measures in issue.

87 It follows that circumstances such as those posited by the parties and the interested parties which have submitted observations to the Court do not allow any effective reliance to be placed on the principle of the protection of legitimate expectations and the principle of legal certainty.

- Articles 7(5) and 16 of the Directive are not limited to covering technical rules but must be construed as applying to all discrimination;

- those articles preclude national measures that grant an undertaking preferential capacity for the cross-border transmission of electricity, whether those measures derive from the system operator, the controller of system management or the legislature, in the case where such measures have not been authorised within the framework of the procedure set out in Article 24 of the Directive.

89 By its first question the national court is essentially asking whether Article 86(2) EC is to be construed as justifying measures such as those being contested in the main proceedings.

90 In view of the reply to the second question, it is no longer necessary to reply to the first question.

91 As these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

1. Articles 7(5) and 16 of Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity are not limited to covering technical rules but must be construed as applying to all discrimination.

2. Those articles preclude national measures that grant an undertaking preferential capacity for the cross-border transmission of electricity, whether those measures derive from the system operator, the controller of system management or the legislature, in the case where such measures have not been authorised within the framework of the procedure set out in Article 24 of Directive 96/92.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Vereniging voor Energie, Milieu en Water ea (Energy) [2005] EUECJ C-17/03 (07 June 2005) URL: http://www.bailii.org/eu/cases/EUECJ/2005/C1703.html Cite as: [2005] ECR I-4983, [2005] 5 CMLR 8, [2005] EUECJ C-17/3, [2005] EUECJ C-17/03

Court of Justice of the European Communities (including Court of First Instance Decisions)