GAS Nord Stream 2 1 March, 2019 10:00 am   

OSW: The gas directive revision – EU law poses problems for Nord Stream 2

On 20 February, the Committee of Permanent Representatives of the EU Council (COREPER) endorsed a compromise version of the amendments to the gas directive which had been agreed a week earlier during the tripartite ‘trilogue’ meeting with the European Parliament & European Commission. This almost certainly guarantees that, after the last few formal steps are completed, the directive will come into force in May or June 2019, i.e. before the finalisation of the construction of the Nord Stream 2 pipeline. Agreement on the directive was made possible by, among others, a change in the position adopted by Germany, which had long opposed the application of the EU’s legal rules to the Russian project, as well as the amendments to the directive which had been aimed at guaranteeing that – writes Agata Łoskot-Strachota, analyst at OSW.

The provisional agreement on the amendment is the result of an internal EU compromise, and as a consequence it is less strict than the European Commission (EC)’s original proposal. At the same time, it is the first document which clearly confirms the European Union’s jurisdiction in the case of Nord Stream 2; that is, it confirms that EU law applies to the part of the pipeline which will run through German territorial sea. Its detailed provisions should (assuming the likely date when the directive comes into force) de facto preclude the granting of exemptions from the application of specific rules (such as the Third Energy Package) to the project. The legal framework for the entire pipeline – including the section running from the end of German territorial sea to the border with Russia – will require a separate clarification which should guarantee the application of EU law in the way foreseen in the directive. This will be established either through bilateral German-Russian talks or an intergovernmental agreement (IGA) between the EU and Russia, negotiated by Germany or the EC. In its current version, the directive guarantees Germany an important role in discussions with Russia on the legal regime of Nord Stream 2, and in enforcing the application of EU regulations to the pipeline. At the same time, it acknowledges that the European Commission will have a decisive role in supervising the compliance with EU law of any bilateral decisions taken by the German side.

The agreed revision of the directive will probably not delay the construction of Nord Stream 2, work on which is already fairly advanced; however, the application of individual provisions of the Third Energy Package will complicate, and probably delay, the pipeline’s construction and exploitation.

The revision’s final effects on the project will mainly depend on its implementation: the moment when it finally comes into force, and the concrete way and thoroughness with which the individual provisions are implemented. Of key importance here will be both the policy Germany adopts in this case and its possible bilateral arrangements with Russia, as well as the European Commission’s independence, efficiency and resistance to possible lobbying in taking decisions related to Nord Stream 2 and the rules of its operation. In this context, the period from the elections to the European Parliament to the formation of new EU institutions may have an important influence on the form of any possible arrangements relating to the functioning of Nord Stream 2. In this transitional period, when the effectiveness of the existing institutions, including the Commission, will potentially be lower, the role of the political decisions taken by the member states, including Germany, will increase.

Acceleration of works on the revision

Since the beginning of 2019 and Romania’s assumption of the presidency of the EU Council, work on the revision of the EU gas directive has clearly accelerated. Through most of 2018, this work was de facto suspended at the EU Council level, largely due to the position of Germany, which opposed any changes to the directive. After January 2019, the Romanian presidency presented two subsequent proposals of amendments. The second of these (from 4 February) was largely accepted at a session of COREPER on 8 February and adopted as the Council’s common position on the amendment, after being supplemented with the agreed Franco-German additions. 12 February saw the start – and unexpected finalisation – of the tripartite negotiations in Strasbourg (the so-called ‘trilogue’) between the ITRE Committee (representing the European Parliament) and the Romanian presidency, in the presence of representatives of the European Commission, on the final version of the revision of the directive. The provisional agreement on the gas directive reached during the trilogue was endorsed on 20 February at the subsequent meeting of COREPER. It should next be put to the vote at the European Parliament’s plenary session (probably in April), and approved by the member states’ energy ministers (so called energy Council). The revised directive thus adopted should then be published in the EU’s Official Journal, and 20 days later it will come into force – which, if everything goes off without any complications, will most likely happen in May or June 2019. From then, the member states will have nine months to transpose the directive into national law.

More: OSW