Resistance by the European Court of Justice to the Completion of the Internal Energy Market: How International Investment Law Could Justify Non-compliance with EU Energy Law
Anatole Boute, University of Aberdeen
On 15 September 2011, the European Court of Justice (ECJ) in Commission v. Slovakia delivered a Judgment that could considerably constrain the margin for manoeuvre that the other EU institutions will have in fine-tuning the internal energy market architecture. The ECJ ruled on the delicate interaction between the international investment protection obligations of a Member State (Slovakia) and its duties of compliance with the cornerstone of the internal energy market: non-discriminatory third-party access to the network. According to the Court, terminating a foreign investor's right to priority access to the network would amount to an expropriation in breach of international investment law. To avoid breaching international law, Slovakia could derogate from the obligation to provide non-discriminatory third-party access. The broad interpretation by the ECJ of the protection of foreign investors' rights under international law can constitute an important obstacle to the completion of the internal energy market. Member States quot; in particular new Member States quot; could invoke their investment treaty obligations concluded prior to EU accession in order to avoid complying with EU energy law. Foreign investors (e.g. Gazprom) have a large presence in the energy sector of the "new" Member States. The ECJ's approach could open the door to arbitration challenges against EU regulatory initiatives aiming at safeguarding energy security, such as the recent introduction of a "Gazprom-clause" to limit non-EU control on critical energy infrastructure. The Judgment of the ECJ laid the basis for a "regulatory chill" that could seriously compromise the future effectiveness of EU energy policy. This contribution aims to identify the reasons that led the ECJ to expose EU energy policy to increased risks of arbitration challenges by foreign investors. It analyses the extent to which the ECJ redefined the regulatory environment in which the Commission, Council and Parliament will operate in the energypolicyfield.