Aspects of Property Ownership in the Energy Sector in the Light of the Case Law of the European Court of Justice

Summary

ABSTRACT

This contribution discusses the status of property rights in the energy sector in the context of liberalisation of European Union (EU) energy markets and unbundling in particular. It addresses three specific questions. First, the issue of discrimination of private operators with respect to concessions for acquisition of hydropower resources, in the light of the Norwegian Waterfalls case (EFTA Court). Second, the text takes up the issue of using national property ownership rules for promoting a liberalised market structure in the energy sector, on the basis of the judgment in Essent and Others (EU Court of Justice). Third, the protection of energy investments against indirect expropriation is assessed in light of the case Commission v. Slovakia (EU Court of Justice). The final paragraph offers a summary and outlook in relation to property ownership in the energy sector.

INTRODUCTION

As far as is known, the provision concerning the protection of property ownership is the only provision of the Treaties directly inspired by the Schuman Declaration of 9 May 1950. It may be thus the ‘oldest’ provision of the Treaties. In its current form, Article 345 of the Treaty on the Functioning of the European Union (TFEU) provides that the Treaty ‘shall in no way to prejudice the rules in Member States governing the system of property ownership’. Despite its special origin, this provision has been subject to very little case law. However, recently the Court of Justice of the European Union (the Court) as well as the EFTA Court has, on three occasions, clarified its bearing in the energy sector.

Energy in and of itself as well as facilities for its generation, distribution and use can be objects of rights protected as private property by various international and national legal instruments. At the same time, the so-called social function of property ownership is emphasised in this sector. Today, access to electricity and to various other forms of energy for the purposes of heating and/or cooling is indispensable for all forms of developed human activity and social organisation. Therefore, the energy sector has universally been subject to public intervention and regulation, the EU making no exception is this regard.

Where does the tension between the energy sector and property ownership, then, stem from?