Explanatory Memorandum to COM(2016)53 - Establishing an information exchange mechanism on intergovernmental agreements and non-binding instruments between Member States and third countries in the field of energy - Main contents
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| dossier | COM(2016)53 - Establishing an information exchange mechanism on intergovernmental agreements and non-binding instruments between Member ... |
|---|---|
| source | COM(2016)53  |
| date | 16-02-2016 |
1. CONTEXT OF THE PROPOSAL
Reasons for and objectives of the proposal
The Energy Union Strategy (COM (2015)80) indicates that: 'an important element in ensuring energy (and in particular gas) security is full compliance of agreements related to the buying of energy from third countries with EU law'. In the same spirit, the European Council in its conclusions of 19 March 2015 also called for 'full compliance with EU law of all agreements related to the buying of gas from external suppliers, notably by reinforcing transparency of such agreements and compatibility with EU energy security provisions'.
An information exchange mechanism with regard to intergovernmental agreements (IGAs) between Member States and third countries in the field of energy was established by a Decision adopted by the Parliament and Council on 25 October 2012, which entered into force on 17 November 2012 (the IGA Decision) 1 . The main feature of this mechanism is that the Commission carries out compliance checks of IGAs after a Member State and a third country have concluded such agreements.
Since 2012, the Commission has gained significant experience in the implementation of this mechanism. In general, as analysed in the Impact Assessment on the revision of the IGA Decision and in the report to the European Parliament and to the Council on the application of the IGA Decision, the Commission's assessment is that while the current system is useful for receiving information on existing IGAs and for identifying problems posed by them in terms of their compatibility with EU law, it is not sufficient to solve such incompatibilities. In particular, as stated in the Energy Union Strategy: 'in practice, we have seen that renegotiating such agreements is very difficult. The positions of the signatories have already been fixed, which creates political pressure not to change any aspect of the agreement'.
Therefore, Commission's involvement before a Member State and a third country have concluded such agreements would provide an essential added value by resolving potential conflicts between obligations of Member States under international treaty law and EU law.
In this context the revision of the IGA Decision has two main objectives:
Ensure the compliance of IGAs with EU law to ensure the proper functioning of the internal market and enhance the EU's energy security; and
Enhance the transparency of IGAs in order to increase the cost effectiveness of the EU's energy supply and solidarity between Member States.
Consistency with existing policy provisions in the policy area
This proposal is consistent with a number of measures adopted at EU level to improve the functioning of the EU energy market and to increase the EU's energy security.
The review of the current IGA Decision forms part of the deliverables of the Energy Union Strategy adopted in February 2015, which sets the overall context and governance structure for a renewed EU energy policy.
The Energy Union Strategy foresees in its Action Plan a number of actions to increase the energy security of the EU. This proposal should therefore be seen in the context of other initiatives including the revision of the Security of Gas Supply Regulation 2 . The IGA Decision is closely linked to the Security of Gas Supply Regulation, but the scope of the information exchange mechanism it establishes is wider. The IGA Decision defines IGAs as 'legally binding agreements between one or more Member States and one or more third countries having an impact on the operation or the functioning of the internal energy market or on the security of supply in the Union'. The IGA Decision thus applies to all energy commodity related supply and infrastructure IGAs, in particular gas, oil and electricity. Only IGAs concerning matters within the purview of the Euratom Treaty are not covered. For these IGAs Article 103 of the Euratom Treaty provides for a specific ex-ante procedure.
The scope of the IGA Decision excludes commercial contracts between commercial entities 3 . This proposal does not extend the scope of the IGA decision to commercial contracts related to IGAs since, as indicated in the Energy Union Strategy, this issue is covered, for commercial gas supply contracts, by the proposal for a review of the Security of Gas Supply Regulation.
Consistency with other Union policies
The proposal does not only contribute to the EU energy policy. By ensuring compliance of IGAs with EU law, it also contributes to policies in other areas of Union law such as internal market, competition and public procurement.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
Legal basis
The objectives of this proposal, mentioned above, are in line with the following EU Treaty goals:
• To ensure security of energy supply in the Union (Article 194(1) (b) TFEU);
• To establish a functioning internal energy market, in the spirit of solidarity between the Member States (Article 3(3) TEU; Article 194(1) TFEU).
Article 194 TFEU is therefore the legal basis for the proposed revised IGA Decision, as it was for the current IGA Decision adopted by the Parliament and Council on 25 October 2012.
Subsidiarity (for non-exclusive competence)
Necessity of EU action: The legal basis for the revision of the IGA Decision is Article 194 TFEU. The IGA Decision was adopted in 2012 on this basis, respecting the subsidiarity principle. However, the introduction of an obligatory ex-ante check by the Commission would change the IGA Decision. This change would represent a shift of tasks from Member States to the EU. As explained above, experience shows that assessment by Member States is not sufficient and satisfactory to ensure compliance of IGAs with EU law and creates legal uncertainty. The Commission's ex-ante involvement would provide an essential added value for resolving problems (notably conflicts between obligations of Member States under international treaty law and EU law).
EU added-value: The progressive integration of energy infrastructure and markets, the common reliance on external suppliers, the need to ensure solidarity in times of crisis, all imply that fundamental political decisions on energy should not be taken exclusively at national level without involvement of neighbouring countries and the EU. The IGA Decision stands at the cross-roads of the external dimension (as it involves agreements with third countries) and of the internal market (as non-compliant provisions such as destination clauses have a negative impact on the free flow of energy products within the internal market). There is therefore a clear added value to reinforce the cooperation and transparency at EU level in the framework of this proposal.
Proportionality
The objectives of this proposal are to:
Ensure the compliance of IGAs with Union law to ensure the proper functioning of the internal market and enhance the EU's energy security; and
Enhance the transparency of IGAs to increase the cost effectiveness of the EU's energy supply and solidarity between Member States.
To reach these objectives it is proposed essentially a mix of optional model clauses and an ex-ante assessment of the IGAs before their signature. As explained in the Impact Assessment on the revision of the IGA Decision, keeping the current system would not be efficient. In particular, none of the IGAs identified by the Commission as problematic has been terminated so far.
Similarly, the Impact Assessment concludes that the option of developing mandatory model clauses could help Member States avoiding incompatibility with Union law but that the wide range of situations and business models under the scope of the IGA Decision will, however, not allow developing model clauses precise enough in order to provide legal certainty and substitute an in-depth ex-ante assessment of a final draft text. Furthermore, depending on the position and bargaining power of the third country, Member States might not succeed in including particular model clauses in an IGA.
The Impact Assessment therefore concluded that the compulsory ex-ante control option is the least stringent approach to avoid non-compliant IGAs.
Choice of the instrument
The existing legislation in the area is the IGA Decision. This proposal aims at reinforcing and enhancing measures and procedures provided for in the existing Decision. Therefore it was appropriate to choose a Decision as an instrument. Given the amount and scope of the new elements, the draft Decision proposes a repeal and replacement of the current Decision No 994/2012/EU instead of a modification of the current provisions.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
Ex-post evaluations/fitness checks of existing legislation
This proposal builds on the experience that the Commission has gained on the implementation of the IGA Decision since it entered into force on 17 November 2012 and which has been analysed in the evaluation report annexed to the Impact Assessment on the revision of the IGA Decision and in the Report to the European Parliament and to the Council on the application of the current IGA Decision.
These reports conclude, as regards the effectiveness of the IGA Decision, that its current provisions (in particular the ex-post nature of the compatibility check set out therein) have not resulted in the transformation of concluded non-compliant IGAs into compliant ones and have not directly impacted Member States' negotiations with third countries. In particular, no draft IGA has ever been submitted to the Commission on a voluntary basis for an ex-ante check. Therefore the IGA Decision in its present form is not considered effective.
They also conclude that overall the costs associated with the current IGA Decision are justified by the benefits it provides as it safeguards the functioning of the internal energy market and contributes to security of supply. However, the IGA Decision could be more efficient if the compatibility checks it establishes were done ex-ante (instead of ex-post as at present). This would considerably enhance legal certainty and avoid costs for both Member States and the Commission.
Furthermore, these reports make clear that IGAs will continue to play a key role in the EU's energy sector. The IGA Decision is therefore relevant but needs to adapt to the changing nature of energy supplies and routes. They also underline that there is a clear EU-added value to the IGA Decision, as it reinforces cooperation and transparency at EU level and contributes to security of supply and the functioning of the internal energy market.
Overall, therefore, these reports conclude that the procedures laid down by the current IGA Decision are not fully appropriate, with the main procedural issue in this regard being the ex-post nature of the compatibility check under the current system, which was the result of tough inter-institutional negotiations when the IGA Decision was adopted in 2012.
This proposal addresses the detected deficiencies.
Stakeholder consultations
A public consultation was organized between 28 July and 22 October 2015. The Commission received some 25 responses from stakeholders, including Member States and several associations (regulatory and industry), and the level of response to the consultation can be considered satisfactory.
All respondents underlined the importance of IGAs to security of energy supply and the proper functioning of the internal energy market. As regards the need to strengthen the system established by the IGA Decision and the way in which this could best be done, opinions among the respondent were divided:
A full report on the outcome of this public consultation is annexed to the Impact Assessment on the revision of the IGA Decision and the non-confidential answers published on the Commission's website 4 .
Collection and use of expertise
Information related to the implementation of the IGA Decision is partly confidential, both due to some of the provisions of the IGA Decision itself (Article 4 – Confidentiality) or due to certain exceptions set out in Regulation 1049/2001 5 on public access to European Parliament, Council and Commission documents (Article 4 (1) (a), 3rd indent - Protection of international relations, Article 4 (5) - Request by a Member State not to disclose a document originating from that Member State without its prior agreement or Article 4 (2), 2nd indent - Protection of court proceedings and legal advice). Inter alia for these confidentiality reasons, it was decided not to develop an external study on the implementation of the current IGA Decision.
Impact assessment
All proposed measures were supported by the Impact Assessment. The positive opinion of the Regulatory Scrutiny Board was delivered on 4 December 2015.
Five policy options have been considered in the Impact Assessment:
Contents
Option 1: Baseline: The IGA Decision remains unchanged but the infringement policy is strengthened
Option 2: Model clauses for inclusion in IGAs which do not infringe EU law/guidelines
Option 3: Obligatory ex-ante assessment of IGAs by the Commission
Option 4: Obligatory participation of the Commission as an observer in IGAs negotiations
Option 5: Commission to negotiate EU agreements in the field of energy
The Impact Assessment concluded that the most cost effective, efficient and proportionate option was option 3.
Regulatory fitness and simplification
The proposal will cause a limited increase in administrative burden.
Fundamental rights
4. BUDGETARY IMPLICATIONS
The proposal does not have implications on the EU budget.
5. OTHER ELEMENTS
Implementation plans and monitoring, evaluation and reporting arrangements
The IGA Decision contains a review clause in its Article 8. This article requires the Commission to prepare a report by 1 January 2016 and every three years thereafter.
In addition to the evaluation report in annex to the Impact Assessment on the revision of the IGA decision, a first report to the European Parliament and to the Council accompanies this proposal for a review of the IGA Decision.
For the future, the Commission intends to produce, as requested in Article 8 of the IGA Decision, a subsequent report by 1 January 2020.
Finally, the Commission, in its role as guardian of the Treaties, will pursue when necessary the procedure set out in Article 258 of the Treaty in the event any Member State fails to respect its duties concerning the implementation and application of Union law.
Explanatory documents (for directives)
Not applicable.
Detailed explanation of the specific provisions of the proposal
The revised Decision contains the following elements:
1. Notification obligations with regard to intergovernmental agreements:
• Obligation of Member State to inform the Commission of its intent to enter into negotiations with third country regarding conclusion of new intergovernmental agreements or amending existing ones;
• Commission should be kept informed once such notice of negotiation is given;
• Commission services may provide Member State with advice on how to avoid incompatibility of the intergovernmental agreement with Union law or Union policy positions adopted in Council or European Council conclusions where Member State gives Commission notice of negotiations;
• Obligation of Member State to notify to Commission a draft intergovernmental agreement or amendment with all accompanying documents as soon as agreement has been reached in the negotiations by the parties on all main elements, for Commission's ex-ante assessment;
• Obligation of Member State to notify to Commission intergovernmental agreement or amendments with all accompanying documents upon ratification;
• Obligation of Member State to notify to Commission all existing intergovernmental agreements or amendments with all accompanying documents;
• Agreements between undertakings are not covered by notification obligations, but may be submitted on voluntary basis;
• Obligation of Commission to share information and documents it has received with other Member States in accordance with confidentiality provisions.
2. Assessment by the Commission:
• Obligation of Commission to perform ex-ante assessment of draft intergovernmental agreements or amendments and to inform Member State of possible doubts it may have as to the compatibility with Union law, in particular with internal energy market legislation and Union competition law within six weeks;
• Obligation of Commission to inform Member State of its opinion on compatibility of intergovernmental agreement or amendment with Union law within 12 weeks of date of notification;
• Member State shall not conclude proposed intergovernmental agreement or amendment until Commission informed Member State of any doubts and its opinion. When concluding the proposed intergovernmental agreement or amendment, Member State shall take utmost account of Commission's opinion;
• Obligation of Commission to perform ex-post assessment of existing intergovernmental agreements or amendments and to inform Member States in case of doubts as to the compatibility of these agreements with Union law within nine months of notification.
3. Notification obligations and assessment by the Commission with respect to non-binding instruments:
• Obligation of Member State to submit to Commission existing and future non-binding instruments with all accompanying documents;
• Commission may perform ex-post assessment of submitted non-binding instruments and inform Member State accordingly if it considers measures implementing the non-binding instrument could conflict with Union law;
• Obligation of Commission to share documents it has received with other Member States in accordance with confidentiality provisions.