CJEU Rules on Restrictions on the Free Movement of Capital Affecting Undertakings Active in the Electricity and Natural Gas Markets

In joint cases referred to the Court of Justice of the European Union (CJEU) by the Supreme Court of the Netherlands, CJEU ruled that restrictions on the free movement of capital affecting undertakings active in the electricity and natural gas markets may be compatible with EU law.

The CJEU had been requested to pass a preliminary ruling on the matter. The case deals with the free movement of capital (Article 63 TFEU) and the rules governing the system of property ownership (Article 345 TFEU). On the substance, it addresses questions relating to ownership of electricity and gas distribution system operators, more specifically a Dutch prohibition of privatisation, the prohibition of links with undertakings which generate/produce, supply or trade electricity or gas, and the prohibition of activity which may adversely affect system operation.
The Dutch companies Essent NV, Essent Nederland BV, Eneco Holding NV, Delta NV were originally active in generation/production, supply and/or trade in electricity and/or gas and in the operation and use of electricity or gas distribution systems in the Netherlands. They had brought legal action before the national courts against Dutch legislation which required them to undertake corporate restructuring to comply with certain unbundling and ownership requirements.

Under recent Dutch law a private investor may not acquire or own shares or interests in the capital of an electricity or gas distribution system operator in the Netherlands (“privatisation prohibition”). Also prohibited are ownership or control links between, on the one hand, companies which are members of the same group as an operator of such distribution systems and, on the other, companies which are members of the same group as an undertaking which generates/produces, supplies or trades in electricity or gas in the Netherlands (“group prohibition”). Last, the national legislation also prohibits engagement by such an operator and by the group of which it is a member in transactions or activities which may adversely affect the operation of the system concerned.

Plantiffs argued that the national legislation was incompatible with the free movement of capital.

CJEU agreed that all three prohibitions constitute restrictions on the free movement of capital. As regards the privatisation prohibition, the reasons underlying the choice of the rules of property ownership adopted by the national legislation were, however, factors which might be taken into consideration as circumstances capable of justifying restrictions on the free movement of capital, CJEU said. It was therefore for the referring court to conduct such an examination.

As regards the group prohibition and the prohibition of activities which may adversely system operation CJEU stated that objectives of the Dutch legislation, to combat cross-subsidisation and to prevent distortions of competition, referred to by the national court might, in principle, as overriding reasons in the public interest, justify the restrictions. It was for the referring court to determine if the restrictions at issue were appropriate to the objectives pursued and did not go beyond what was necessary to attain the objectives.

Source: CJEU Press Release, Full Text (English)

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2 Responses to “CJEU Rules on Restrictions on the Free Movement of Capital Affecting Undertakings Active in the Electricity and Natural Gas Markets”

  • Hello,

    Can you provide some comment as to the effect of this on German sale of surplus renewable electricity into the Netherlands?

    Particularly with respect to “activities that may adversely affect system operation”, does this mean the Netherlands has the right to refuse surplus renewable energy from Germany (which may disrupt the local grid), subject to local court ruling?

    Kind Regards,

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