Abstract
To a large extent, the energy sector consists of what can be termed critical infrastructure. It is therefore not surprising that the EU’s new foreign direct investment screening mechanism also includes the energy sector.
However, existing EU legislation has provisions that can perform the same function as the more formal screening mechanism. This chapter presents and analyzes this legislation. It is concluded that the present EU energy legislation already contains tools regarding investment control.
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Notes
- 1.
Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection, OJ L 345, 23.12.2008, pp. 75–82.
- 2.
Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79I, 21.3.2019, pp. 1–14.
- 3.
This definition comes from Chevalier (2006).
- 4.
See below under Sect. 2 regarding EU competence regarding energy.
- 5.
The capability for hostile reasons to shut down infrastructure or other facilities are among the risk by foreign investments in critical infrastructure. This is often referred to as a kill switch. However, this term is normally used to describe security measures in among others digital devices, which is installed to protect data by erasing the data or disabling the device, for instance in connection with thefts.
- 6.
For other legislation supporting the focus on security, see Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union, OJ L 194, 19.7.2016, pp. 1–30, and Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act), OJ L 151, 7.6.2019, pp. 15–69. Further, in 2019 the Commission adopted a dedicated Guidance on cybersecurity in the energy sector.
- 7.
See European Commission, 13 March 2019, Commission Staff Working Document on Foreign Direct Investment in the EU—Following up on the Commission Communication “Welcoming Foreign Direct Investment while Protecting Essential Interests” of 13 September 2017, SWD(2019) 108 final, p. 2.
- 8.
EURACTIV (16 July 2018), China set to fully control Portugal’s power grid amid Europe’s inertia, available at: https://www.euractiv.com/section/eu-china/news/china-set-to-fully-control-portugals-power-grid-amid-europes-inertia/ (last accessed 6 January 2020). See also Liedtke (2017) and Asensio et al. (2018).
- 9.
The ownership of 50Hertz is now shared between the Belgian system operator Elia and the German state-owned KfW Bank Group.
- 10.
European Commission (2016), EU-China Roadmap on energy cooperation (2016–2020). Available at: https://ec.europa.eu/energy/sites/ener/files/documents/FINAL_EU_CHINA_ENERGY_ROADMAP_EN.pdf (last accessed 6 January 2020).
- 11.
European Commission Press Release (14 February 2019), Commission welcomes European Parliament’s support for investment screening framework, available at: http://europa.eu/rapid/press-release_IP-19-1052_en.htm (last accessed 6 January 2020). The national law of the Member States will not be dealt with in this chapter. Nor will treaty provisions regarding the EU internal market freedoms. For a comment to those, please see De Luca (2013).
- 12.
The policy areas covered by the ECSC treaty were integrated into the Treaty of Rome, and the ECSC expired in 2002.
- 13.
For a discussion regarding the balance of competences between the EU and the Member States regarding the EU Screening Regulation with regards to energy, see Reins (2019).
- 14.
Regarding the interpretation of TFEU Article 194(2), see Johnston and van der Marel (2013), p. 181.
- 15.
See about these sectors in Mortensen in: Jessen et al. (2016), pp. 421–555.
- 16.
Based on the Treaty Establishing the European Atomic Energy Community (Consolidated version), OJ C 327, 26.10.2012, pp. 1–107.
- 17.
See the Clean Energy for All Europeans package consisting of eight legislative acts updating the EU Energy Policy. A reference to the updated legislation can be found at https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/clean-energy-all-europeans (last accessed 6 January 2020).
- 18.
Directive 96/92/EC concerning common rules for the internal market in electricity, OJ L 27, 30.1.1997, pp. 20–29 (hereinafter the first Electricity Directive); and Directive 98/30/EC concerning common rules for the internal market in natural gas, OJ L 204, 21.7.1998, pp. 1–12 (hereinafter the first Gas Directive).
- 19.
Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, OJ L 211, 14.8.2009, pp. 94–136 (hereinafter the gas market directive). Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, OJ L 211, 14.8.2009, pp. 55–93 have been replaced by Directive (EU) 2019/944, OJ L 158, 14.6.2019, pp. 125–199 (hereinafter the electricity market directive).
- 20.
European Commission, Communication from the Commission to the European Council and the European Parliament of 10 January 2007, “An energy policy for Europe”, COM(2007) 1 final.
- 21.
International Energy Agency (IEA) (2018).
- 22.
Van Nuffel et al. (2017), p. 16. Available at https://www.europarl.europa.eu/RegData/etudes/STUD/2017/595356/IPOL_STU(2017)595356_EN.pdf (last accessed 6 January 2020).
- 23.
ENTSOG (2018), p. 32.
- 24.
Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons, OJ L 164, 30.6.1994, pp. 3–8.
- 25.
Regarding a license to utilize a resource, see Hydrocarbons Directive Article 3(1).
- 26.
See Article 3(2) in the gas market directive and Article 9 in the electricity market directive.
- 27.
Electricity market directive Article 53 (former Article 11) and Gas market directive Article 11.
- 28.
See in this volume, Barbara Kaech & Moritz Wüstenberg, Building Pipelines—Experiences with Formal and Informal Screening Mechanisms.
- 29.
Vranes (2012), p. 642.
- 30.
Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October 2017 concerning measures to safeguard the security of gas supply and repealing Regulation (EU) No 994/2010, OJ L 280, 28.10.2017, pp. 1–56.
- 31.
European Commission Communication (13 September 2017), Proposal for a Regulation of the European Parliament and of the Council establishing a framework for screening of foreign direct investments into the European Union, COM(2017) 487 final, p. 6.
- 32.
Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC, OJ L 158, 14.6.2019, pp. 1–21.
- 33.
Examples of horizontal separation can be found in the railway sector. See Mortensen (2016), p. 442.
- 34.
Article 31(3) in the gas market directive and Article 56 in the electricity market directive (both regardig unbundling of accounts).
- 35.
Mortensen (2016), p. 442 ff. Regarding the electricity market directive, see p. 482 and regarding the gas market directive pp. 496–497.
- 36.
Ownership unbundling was not a demand in the previous two directives, the first Electricity Directive and Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC—Statements made with regard to decommissioning and waste management activities, OJ L 176, 15.7.2003, pp. 37–56.
- 37.
Vranes (2012) pp. 641–642. The Member States have an alternative to ownership unbundling—independent system operator (ISO) or independent transmission operator (ITO).
- 38.
Opinion of 27 September 2017 of the Legal Service. Available at: http://www.politico.eu/wp-content/uploads/2017/09/SPOLITICO-17092812480.pdf (last accessed 6 January 2020). The failed attempt by the Commission is described in this volume, (see the chapter by Kaech and Wüstenberg). These authors also refer to Talus (2017), who argues that the gas directive was limited to the EU domestic gas market.
- 39.
European Commission Communication (30 June 2017) Report from the Commission—Annual Report 2016 on Subsidiarity and Proportionality, COM(2017)600 final. See also Talus (2019).
- 40.
The Energy Charter Treaty entered into force on 16 April 1998. A consolidated version can be found on https://energycharter.org/fileadmin/DocumentsMedia/Legal/ECTC-en.pdf (last accessed 6 January 2020).
- 41.
International Energy Charter (11 January 2019), The Energy Charter Treaty (ECT) Remains the Most Frequently Invoked IIA. Available at: https://energycharter.org/media/news/article/the-energy-charter-treaty-ect-remains-the-most-frequently-invoked-iia/?tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Baction%5D=detail&cHash=4b7f59380a66e07d026d71f9d4823302 (last accessed 6 January 2020).
- 42.
A list of cases can be found on https://energycharter.org/what-we-do/dispute-settlement/all-investment-dispute-settlement-cases/ (last accessed 6 January 2020).
- 43.
Regarding statistic on the disputes, see https://energycharter.org/what-we-do/dispute-settlement/cases-up-to-18-may-2018/ (last accessed 6 January 2020).
- 44.
For an analysis of the Nord Stream 2 project, see in this volume Kaech and Wüstenberg, Building Pipelines—Experiences with Formal and Informal Screening Mechanisms.
- 45.
Directive (EU) 2019/692 of the European Parliament and of the Council of 17 April 2019 amending Directive 2009/73/EC concerning common rules for the internal market in natural gas, OJ L 117, 3.5.2019, pp. 1–7.
- 46.
See for a comment on that possible case by EURACTIV (29 May 2019), Exploring the limits of EU’s unbelievable behaviour on Nord Stream 2. Available at https://www.euractiv.com/section/energy/opinion/exploring-the-limits-of-eus-unbelievable-behaviour-on-nord-stream-2/ (last accessed 6 January 2020).
- 47.
See EnergyPost.eu (10 April 2018), New Gas Market Directive will change balance of power between EU and Member States. Available at https://energypost.eu/new-gas-market-directive-will-change-balance-of-power-between-eu-and-member-states/ (last accessed 6 January 2020).
- 48.
Judgement of the Court (Grand Chamber) of 6 March 2018, Slovak Republic v Achmea BV, C-284/16, ECLI:EU:C:2018:158.
- 49.
See European Commission Communication (19 July 2018), Protection of intra-EU investment, COM(2018) 547 final.
- 50.
Judgement of the Court (Grand Chamber) of 30 May 2006, The Commission v Ireland, C-459/03, ECLI:EU:C:2006:345. The case concerned the MOX Plant at Sellafield, UK (recycling of plutonium from spent nuclear fuel).
- 51.
International Energy Charter (11 January 2019), The Energy Charter Treaty (ECT) Remains the Most Frequently Invoked IIA. Available at: https://energycharter.org/media/news/article/the-energy-charter-treaty-ect-remains-the-most-frequently-invoked-iia/?tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Baction%5D=detail&cHash=4b7f59380a66e07d026d71f9d4823302 (last accessed 6 January 2020).
- 52.
EnergyPost.eu (6 March 2019), “Outdated Energy Charter Treaty leaves new economy investments unprotected”. Available at: https://energypost.eu/outdated-energy-charter-treaty-leaves-new-economy-investments-unprotected/ (last accessed 6 January 2020).
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Mortensen, B.O.G. (2020). The Energy Sector. In: Hindelang, S., Moberg, A. (eds) YSEC Yearbook of Socio-Economic Constitutions 2020. YSEC Yearbook of Socio-Economic Constitutions, vol 2020. Springer, Cham. https://doi.org/10.1007/16495_2020_21
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