Energy Nord Stream 2 13 October, 2017 7:30 am   
COMMENTS: Jerzy Dudek

Nord Stream 2: Council’s opinion on negotiations is one-sided and unconvincing

Opinion of the EU Council’s Legal Service on the Nord Stream 2 agreement: unconvincing, incorrect, and one-sided – writes Jerzy Dudek*, energy and EU law expert.

A confidential opinion prepared by the Council’s lawyers on the special international agreement between the EU and Russia has recently leaked into the press. The agreement would regulate legal issues surrounding the Nord Stream 2 gas pipeline. What does the opinion include and how should it be assessed? After a close analysis it seems surprising to say the least.

Such a legal opinion is a standard task. After the European Commission asked in June the Council for consent to open negotiations between the EU and Russia, the Council had to determine whether it wanted to (political element) and whether it could (legal element) authorize such negotiations. Initial discussions in the Council revealed that there was high probability that the majority of its members would support the negotiations. In further discussions the Council’s legal service was asked– according to Der Spiegel at the request of Germany– for an opinion on what competences the EU and Member States had when it came to the possible agreement. Considering the never-ending legal battles over the division of competences between the Commission and the Council (which represents the Member States), one could expect that the Council’s lawyers would definitely argue for as little EU competence as possible with regard to the EU-Russia deal. However, they went much further.

According to the opinion, the European Union does not have the power to individually enter the EU-Russia agreement (i.e. it does not have exclusive competence). This position is at least debatable and one could present a very strong case for the EU’s exclusive competence. The jurisprudence of the Court of Justice allows to seriously consider it. However, the Council’s lawyers reject it unequivocally. Interestingly, the core argument is that the 2009 Gas Directive does not regulate such a gas pipeline as Nord Stream 2 at all. This argument is later on repeated throughout the opinion.

The Council’s Legal Service analyses whether the agreement with Russia could be signed by both the EU and its Member States (i.e. whether there is a shared competence that requires a mixed agreement). The lawyers state that it is not necessary for the EU to exercise its competence and thus conclude there is no case of shared competence. Similarly to the point made earlier, one could formulate very strong counter-arguments in this instance as well. Importantly, after peeling off a few layers of the opinion at this point, it is apparent that the argument is based again on the assumption that the 2009 Gas Directive does not apply to such gas pipelines as Nord Stream 2.

The opinion not only questions the EU’s competence to sign the EU-Russia agreement, but also rejects the need to have one at all. It deems the EC’s request politically motivated and without a legal ground. In this regard the opinion’s reasoning is based again on the argument that the 2009 Gas Directive does not apply to a gas pipeline such as Nord Stream 2 and thus there is no legal problem.

This recurring argument is the foundation of the reasoning presented by the Council’s Legal Service. While it is not always in plain sight, it resurfaces at a closer look. How is this argument, which determines almost everything, constructed? A closer scrutiny surprisingly reveals that it is based on a serious logical error. The argument goes like this: since a gas pipeline like Nord Stream 2 is not enshrined in derogations from the demanding rules on liberalising the EU gas market, then this cannot be explained differently than by admitting that the Gas Directive does not apply to such a gas pipeline at all. Additionally, it remains very unclear on what basis it is assumed that the Directive regulates only infrastructure mentioned in the derogations. Moreover, one could easily question on the ground of the Directive the similarity between an interconnector and Nord Stream 2. Finally and most importantly, there are much better arguments that lead to the conclusion that the Directive provides a legal framework for the EU part of Nord Stream 2. Actually, there should be no doubt about this really when one reads the Directive from the beginning to the end (and not from the end to its middle as it seems from the Legal Service’s opinion). Since it is a longer issue, at this point I could recommend only the latest Policy Brief published by the Florence School of Regulation in this regard. The arguments presented there are much more in line with the Gas Directive and with the aims that the Directive was meant to fulfil.

The argumentation offered in the opinion is unconvincing and incorrect. However, the list of issues continues. I will limit myself only to one more example. Not only do the authors use a very perverse understanding of security of supply (an objective included in EU treaties, which is why it is so important), but they also perceive it only through one eye. The western European one. The other eye remains shut. In result, the opinion looks at the security of supply to the EU (the entire EU!) only from the perspective of Western markets (to be precise, the North-West European market), which are more secure, and ignores challenges the Eastern European markets are facing.

*Jerzy Dudek – energy and EU law expert. In his research at the European University Institute in Florence he focuses on the EU’s external energy policy, the division of competence in this area between the EU and its Member States, and on energy security. He graduated from Cambridge University and the University of Warsaw. Associate Fellow at the Center of Analysis of the Jagiellonian Club. Previously worked as Research Associate at the Florence School of Regulation. Twitter: @J_Dudek_