Vertical division of Competences between the EC and EU Member States Some Remarks on the Evolution of the European Energ

1. Vertical division of Competences between the EC and EU Member StatesSome Remarks on the Evolution of the European Energy Policy 1 The Basic Rules and Principles of the Vertical Division of Competences � 2 The Existence and Nature of the Community Competences � 3 Some Remarks on the Evolution of the European Energy Policy

2. 1 - The Basic Rules and Principles of the Vertical Division of Competences 1.1 What is vertical division of competences all about?

3.  1 The Basic Rules and Principles of the Vertical Division of Competences  1.2 Principle of attribution of powers/conferral of powers/enumerated competences � Applies to the internal legislative acts of the Community as well as its external measures. Focus on the evolution of Community�s internal legislative competences. Article 7(1) EC: �Each institution shall act within the limits of the powers conferred upon it by this Treaty�. Article 230 EC 2nd paragraph: lack of competence is one of the grounds for declaring a Community act void by the Court of Justice. Article 5 EC 1st paragraph: �The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein�.

4. 1 The Basic Rules and Principles of the Vertical Division of Competences Specific competences - Opinion of the Court of Justice of the European Communities 2/94, Accession by the Communities to the Convention for the Protection of Human Rights and Fundamental Freedoms, ECR 1996, p. I-1759. The Reform Treaty on European Union: Article 5(1): the principle of conferral of powers. Article 5(2): the specificity of the Union�s competences. The new Treaty on the Functioning of the European Union � enhancing to systematize Union�s exclusive and shared competences.

5. 1 The Basic Rules and Principles of the Vertical Division of Competences The Court of Justice since its early case law � Community�s competences based on limitation of Member States� sovereignty or transfer of powers from the Member States to the Community �Case 22/70, Costa v. ENEL, judgment 15.7.1964 , ECR 1964; Opinion 2/94, Accession by the Communities to the Convention for the Protection of Human Rights and Fundamental Freedoms, 28.3.1996, ECR 1996, s. I-1759. The principle of conferral of powers is well established both in the EC Treaty and in the case law of the Court of Justice.

6. 1 The Basic Rules and Principles of the Vertical Division of Competences 1.3 Legal Basis To be found from the EC Treaty. Failure to refer to a precise provision of the EC Treaty �is indispensable where, in its absence, the parties concerned and the Court of Justice are left uncertain as to the precise legal basis� - Case 45/86, Commission v. Council, judgment 26.3.1987, ECR 1987, p. 1493. The content and main object of the act in question are decisive - E.g. case C-436/03, European Parliament v. Council, judgment 2.5.2006. Specific � e.g. Article 175 EC on environmental policy More general � e.g. Article 95 EC concerning the establishment and functioning of the internal market Even more general � Article 308 EC which enables a Community action where it proves necessary to attain in the course of the operation of the common market one of the objectives of the Community and the Treaty does not provide the necessary powers

7. 1 The Basic Rules and Principles of the Vertical Division of Competences The EC Treaty � a trait� cadre: activities in Article 3 EC & Part Three of the EC Treaty objectives What is the significance of the principle of conferral of powers? scholars divided: legalistic viewpoint dynamic viewpoint

8. 1 The Basic Rules and Principles of the Vertical Division of Competences 1.4 Some Remarks on Rules and Principles on the Division of Competences pre-emption �doctrine: limits national legislator�s legislative competence � or does it? Court of Justice�s case law: national legislator is precluded from adopting new national legislative measures to the extent to which they would be incompatible with the Community legislation - Case 106/77, Simmenthal SpA, judgment 9.3.1978, ECR 1978, p. 629; Case C-158/91, Levy, judgment 2.8.1993, ECR 1993, p. I-4287. when the Community law covers exhaustively the area in question, or when the national law would be in breach with the Community law or when the national law would form an obstacle to the smooth functioning of the common market - Case 218/85, CERAFEL v. Le Campion, judgment 25.11.1986, ECR 1986, p. 3513; Case C-1/96, The Queen v. Minister of Agriculture, Fisheries and Food, ex parte Compassion in World Farming Ltd, judgment 19.3.1998, ECR 1998, p. I-1251.

9. 1 The Basic Rules and Principles of the Vertical Division of Competences the subsidiarity and the proportionality principle � aim: to restrict Community�s creeping competences. Article 5 (2) EC: �In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community.� Article 5 (3) EC: �Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.� Community legislator�s discretion whether to legislate or not. Significance after the Community act has been adopted?

10. 1 The Basic Rules and Principles of the Vertical Division of Competences the principle of co-operation/loyal co-operation - the obligation to apply the principle of supremacy, the pre-emption �doctrine & Member States� requirement to implement the Community law. Article 10 EC: �Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community's tasks. They shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty.� Case law of the Court of Justice: Case C-2/88, Imm. Zwartveld etc., Order 13.7.1990, ECR. 1990, p. I-3365; case C-275/02, Commission v. First NV & Franex, judgment 26.11.2002, ECR 2002, p. I-10943, case C-339/00, Ireland v. Commission, judgment 16.3.2003, ECR. 2003, p. I-1175; case C-344/91, Germany v. Commission, judgment 4.3.2004, ECR. 2004, p. I-2081; case C-459/03, Commission v. Ireland, judgment 30.5.2006, ECR. 2006, p. I-4635.

11. 1 The Basic Rules and Principles of the Vertical Division of Competences implementation: 1) transposing the Community law into national legislation; 2) applying Community law in each individual case before a national competent authority i.e. administrative implementation; and 3) securing by a sanction if need be that the Community legislation is properly applied. the integrity and independence of the Community legal order. reciprocal an independent/dependent concept?

12. 2 The Existence and Nature of the Community Competences Currently no provisions in the EC Treaty systematically defining the Community competences. The task of sorting out whether and to what extent the Community is competent to adopt legislations in a specific area: The political objectives of the EU and EC Treaty preambles. The general purpose of the EC � Article 2 EC. EC activities � Articles 3 and 4 EC. The material provisions of the EC Treaty. Legislation in a specific area.

13. 2 The Existence and Nature of the Community Competences The Court of Justice�s case law on external relations: scrutiny in two stages � Whether Community competence exists? Either explicit or implied - case C-469/98, Commission v. Finland (�Open Skies�), judgment 5.11.2002, ECR. 2002, p. I-9627. Several Treaty provisions used in the energy policy area. Article 308 EC Article 95 EC on internal market Article 175 EC on environmental policy Others�: TENs (Article 154 to 156 EC)�; Article 100 EC

14. 2 The Existence and Nature of the Community Competences The Court of Justice: Article 95 EC is a specific provision i.e. the principle of conferral of powers applies; regulation of the internal market and harmonization of Member States legislation - C-376/98, Germany v. the European Parliament and the Council, judgment 5.10.2000, ECR 2000, p. I-8419; C-491/01, The Queen v. Secretary of State for Health, ex. parte British American Tobacco (�BAT�), judgment 10.12.2002, ECR 2002, p. I-11453 ; C-210/03, Swedish Match v. Secretary of State for Health, judgment 14.12.2004, ECR. 2004, p. I-11893.

15. 2 The Existence and Nature of the Community Competences The nature of the Community competence Either exclusive or shared/joined/mixed � e.g. Opinion 2/00, Cartagena Protocol, 6.12.2001, ECR. 2001, p. I-9713 . Articles 2 to 6 of the new Treaty on the Functioning of the European Union � aiming to categorize Union competences; for good?

16. 3 Some Remarks on the Evolution of the European Energy Policy �������� The classical division of branches of law � the place of the energy policy area? � 3.1 Energy Policy Area - No Specific Legal Basis, Yet � �������� No specific legal basis in the EC Treaty. �������� Energy related Community legislation adopted since the late 1960�s. �������� European Steel and Coal Community; Euratom. �������� Energy is not specifically excluded from the EC Treaty. The question of a specific energy policy provision up for consideration in several IGCs � the Constitutional Treaty -> the Treaty on the Functioning of the European Union:

17. 3 Some Remarks on the Evolution of the European Energy Policy � �TITLE XX ENERGY Article 176a In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy shall aim, in the spirit of solidarity between Member States, to: (a)���� ensure the functioning of the energy market; (b)��� ensure security of energy supply in the Union, and (c)���� promote energy efficiency and energy saving and the development of new and renewable forms of energy; (d)��� promote the interconnection of energy networks. Without prejudice to the application of other provisions of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish the measures necessary to achieve the objectives in paragraph 1. Such measures shall be adopted after consultation the Committee of the Regions and the Economic and Social Committee. � Such measures shall not affect a Member State�s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply, without prejudice to Article 175(2)(c). � By way of derogation from paragraph 2, the Council, acting in accordance with a special legislative procedure, shall unanimously and after consulting the European Parliament, establish the measures referred to therein when they are primarily of a fiscal nature.�

18. 3 Some Remarks on the Evolution of the European Energy Policy Article 4 of the Treaty on the Functioning of the European Union - shared competence in the energy policy area. But to date no explicit energy policy competence. Yet, the principle of conferral of power applies. Appropriate legal basis of the EC Treaty & suitable objectives. Legal bases: Articles 95 and 308 EC; Articles 154-156 on TENs; Article 175 EC on environmental policy & others: Community competition rules (i.e. Articles 81, 82, 86 EC); Community rules on State aids (i.e. Articles 87-89 EC); Articles concerning the free movement of goods (Articles 28 to 30 EC).

19. 3 Some Remarks on the Evolution of the European Energy Policy The main objectives of the European energy policy e.g. the Green Paper A European Strategy for Sustainable, Competitive and Secure Energy of 8th March 2006 (COM(2006) 105 final): � First, �Sustainability : (i) developing competitive renewable sources of energy and other low carbon energy sources and carriers, particularly alternative transport fuels, (ii) curbing energy demand within Europe, and (iii) leading global efforts to halt climate change and improve local air quality. Second,: � Competitiveness: (i) ensuring that energy market opening brings benefits to consumers and to the economy as a whole, while stimulating investment in clean energy production and energy efficiency, (ii) mitigating the impact of higher international energy prices on the EU economy and its citizens and (iii) keeping Europe at the cutting edge of energy technologies.� And third,: �Security of supply: tackling the EU�s rising dependence on imported energy through (i) an integrated approach � reducing demand, diversifying the EU�s energy mix with greater use of competitive indigenous and renewable energy, and diversifying sources and routes of supply of imported energy, (ii) creating the framework which will stimulate adequate investments to meet growing energy demand, (iii) better equipping the EU to cope with emergencies, (iv) improving the conditions for European companies seeking access to global resources, and (v) making sure that all citizens and business have access to energy.�

20. 3 Some Remarks on the Evolution of the European Energy Policy First, sustainability or the protection of the environment: Directive 2001/77/EC of the European Parliament and of the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market.[1] The legal basis Article 175(1) EC on environmental policy. Note the difference in the decision-making procedure referred to under Article 175(1) EC and Article 175(2) EC. Several reasons for basing the Directive on Article 175(1) EC � the 1st preamble the need to promote renewable energy sources a priority measure; contributing to the environmental protection and sustainable development but also to security of supply and internal market; the 2nd preamble the promotion of electricity from renewable sources a high Community priority for reasons such as of security and diversification of energy supply and of environmental protection. Discretion left to Member States as to the measures to promote the exploitation of renewable energy sources in electricity production. [1] Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, EUOJ 27.10.2001, No L 283, p. 33.

21. 3 Some Remarks on the Evolution of the European Energy Policy Article 2: Member States� indicative targets in terms of a percentage of electricity consumption. Indicative � or not? Article 3: No general Community-wide support scheme to promote electricity produced from renewable energy sources. Article 5: Member States are required to ensure that the origin of electricity produced from renewable energy sources can be guaranteed; no requirement to recognize the purchase of a guarantee of origin from other Member States or the corresponding purchase of electricity as a contribution to the fulfillment of a national quota target. 10th preamble: National schemes for the guarantee of origin do not imply a right to benefit from Member States� national support mechanisms. A transitional legislative framework.

22. 3 Some Remarks on the Evolution of the European Energy Policy Second, competitiveness. Directives establishing the internal electricity and gas market as well as the regulation on conditions for access to the network for cross-border exchanges in electricity[1]. The internal electricity market Directive 2003/54/EC[2] - part of the second energy liberalization package. The first liberalization package containing Directive 96/92/EC concerning common rules for the internal market in electricity and Directive 98/30/EC concerning common rules for the internal market in gas. The first pieces of Community legislation aiming to increase competition and smoothening the way for the internal market already at the beginning of 1990�s. Directive 92/96/EC left a wide margin of discretion for Member States on essential questions relating to the organization of their electricity markets: e.g. access to network; market opening; regulatory authorities. [1] Regulation 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, OJ No L 176, 2003, p. 1. [2] 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, EUOJ 15.7.2003, No L 176, p. 37.

23. 3 Some Remarks on the Evolution of the European Energy Policy The internal electricity market Directive 2003/54/EC � more ambitious. The legal basis - Article 95 EC (Article 47(2) EC; Article 55 EC). The choices of the national legislator more restricted: network access system (Article 20); the definition of an eligible customer (Article 21); an obligation to unbundle vertically integrated TSOs and those DSOs serving less than 100 000 connected customers and setting minimum criteria on unbundling (Articles 10 and 15); requirements on national regulatory authorities (Article 23) Other qualitative requirements as to the functioning of the electricity market � public service obligations which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection (Article 3 (2)). An obligation is also set to Member States to set up a universal service at least to all household customers. Universal service means that these customers shall have the right to be supplied with electricity of specified quality within their territory at reasonable, easily and clearly comparable and transparent prices (Article 3(3)). Even more detailed � but is this enough? Commission�s new legislative package on the internal market for electricity and gas SEC(2007) 1179.

24. 3 Some Remarks on the Evolution of the European Energy Policy Third, Community legislation relating to the security of supply. First pieces of Community legislation in the late 1960s. Directive 2005/89/EC of the European Parliament and of the Council concerning measures to safeguard security of electricity supply and infrastructure investment.[1] The legal basis of the Directive � Article 95 EC on internal market. Issues justifying the utilization of Article 95 EC as a legal basis: 3rd preamble � the significant differences between Member States� policies of security of electricity supply would lead to distortions of competition, the definition of clear roles and responsibilities of the competent authorities, of Member States, and of all relevant market actors crucial in safeguarding proper functioning of the internal market and avoiding creating obstacles to market entrants as well as avoiding to create distortions of the internal market; 7th preamble � cooperation between national TSOs in issues relating to network security vital to the development of a well functioning internal market, a lack of coordination in network security detrimental to the development of equal conditions for competition; 13th preamble � low levels of interconnection have a fragmenting effect on the market and are an obstacle to the development of competition. 18th preamble � the Directive in line with the principle of subsidiarity since its objectives i.e. securing electricity supplies based on competition and the creation of a fully operational internal electricity market can be achieved better at Community level than by the Member States themselves, also in line with the principle of proportionality. [1] Directive 2005/89/EC of the European Parliament and of the Council of 18 January 2006 concerning measures to safeguard security of electricity supply and infrastructure investment, EUOJ 4.2.2006, No L 33, p. 22.

25. 3 Some Remarks on the Evolution of the European Energy Policy The material provisions of the Directive also link the security of electricity supply with a more general aim to ensure the proper functioning of the internal market for electricity. Requires the Member States to ensure an adequate level of generation capacity and adequate balance between supply and demand as well as an appropriate level of interconnection between Member States. Provides the Member States with a rather general framework within which to define security of electricity supply policies consisting of a requirement to set minimum operational rules and obligation on network security (Article 4), maintaining balance between supply and demand (Article 5) and establishing a regulatory regime providing investment signals for TSOs and DSOs. Shall the implementation of the Directive enhance the general objectives of Article 95 EC i.e. both the requirement of regulating the internal market and of harmonizing Member States legislation in security of electricity supply policies.

26. 3 Some Remarks on the Evolution of the European Energy Policy The principle of conferred powers � EC Treaty legal bases & objectives The principles of subsidiarity or proportionality The obligation of cooperation, the preemption �doctrine & supremacy - just how cumbersome this task may prove to be for a national legislator, competent national authority, national court?