Judgment — ECLI:EU:C:2014:1316
Date: 2014-06-05
Language of the case: Bulgarian
Court formation: Fifth Chamber
Subject matter: Energy
Procedure: Action for failure to fulfil obligations - unfounded
Origin: Bulgaria

summary of the main arguments 13. The Commission has argued, inter alia that the Bulgarian TSO Bulgartransgaz did not provide capacity for gas supply in both directions at every entry and exit point in Bulgaria, and specifically at the points where the Bulgarian system connects with the Romanian and Greek systems. This occurs at Sidirokastro in the case of Greece and Negru Voda in the case of Romania. 14. The Commission therefore alleges that the obligation contained in Article 16(1) of Regulation No 715/2009 (Article 5(1) of Regulation No 1775/2005) to make available maximum capacity to market participants, combined with the obligation to provide firm and interruptible third-party access services as referred to in Article 14 of Regulation No 715/2009 (Article 4 of Regulation No 1775/2005) implies that a TSO has to offer capacity in both directions of its pipeline system. In cases where it is not physically possible to transport gas in both directions, the Commission alleged that it was still possible for a TSO to offer capacity as a ‘counter-flow’ or ‘backhaul’ in the other direction, on a virtual basis. According to the Commission this enables the TSO to offer capacity that even exceeds the technical capacity of the network. (4) 15. The Commission further alleges that by not providing counter-flow capacities on an interruptible basis, a TSO would violate the obligations stemming from Regulation No 715/2009 to implement capacity allocation mechanisms which are compatible with market mechanisms, including with gas trading hubs. The Commission has noted that Article 16(2)(b) of Regulation No 715/2009 (Article 5(2)(b) of Regulation No 1775/2005) requires a TSO to implement and publish non-discriminatory and transparent capacity allocation mechanisms, which shall ‘be compatible with the market mechanisms including spot markets and trading hubs, while being flexible and capable of adapting to evolving market circumstances’. 16. According to the Commission liquidity of gas markets requires that price signals can flow in both directions of a network, not only in the same direction as the physical flow in the case of a unidirectional network. Moreover, efficient network operation referred to in Article 16(1) of Regulation No 715/2009 requires that inverse capacity is included in the total capacity of a network that must be maximised. 17. It is also worth noting that there is a factual dispute between the parties. Self-evidently, the Commission’s case is based on the factual claim that Bulgaria does not provide virtual counter-flow capacities on an interruptible basis between Sidirokastron and Negru Voda, and that the competent regulatory bodies have not taken concrete measures to ensure fulfilment of this obligation. In contrast, the Bulgarian Government has contended, as an argument in the alternative, that these services are in fact provided. This they argue is reflected by information that has been published on the website of Bulgartransgaz appertaining to backhaul services. (5) 18. The primary argument, however, of the Republic of Bulgaria is that the combined effect of Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009 (Articles 4(1) and 5(1) and (2)(b) of Regulation No 1775/2005) do not require it to provide counter-flow capacities, virtual or otherwise. It is contended that this conclusion is inevitable whether a literal, historical, contextual or teleological approach is taken to the interpretation of relevant provisions of Regulation No 1775/2005. 19. The Republic of Bulgaria adds that the expressly worded obligation in Regulation (EC) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC (6) for Member States to provide permanent and physical bi-directional supply of gas militates against an interpretation of Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009 that would require Member States to provide a corresponding service on a virtual basis. 20. The Republic of Bulgaria further asserts that the existence of two separate gas systems in Bulgaria, one a domestic system and the other a transit system, prevents it from providing virtual reverse gas transmission services, along with technical difficulties at Negru Voda due to the absence of the necessary coordination measures on the part of the TSO of the neighbouring country. 21. The Republic of Bulgaria also points toward a series of agreements that were concluded with the USSR in 1986, and subsequently, but before the accession of the Republic of Bulgaria to the European Union, that prevent it from supplying virtual reverse flow gas transmission services between Sidirokastron and Negru Voda. IV – Analysis 1. Admissibility of the action 22. I would start by observing that the key date for assessing the legality of Bulgaria’s conduct is 28 August 2010, that is, two months from the date of the Commission’s reasoned opinion, (7) so that the EU legislative act governing the dispute to hand ratione temporis is Regulation No 1775/2005. I find it problematic, therefore, that the form of order sought by the Commission refers only to Regulation No 715/2009, a measure which did not bind Bulgaria until 3 March 2011. 23. However, the Court has, on at least one occasion, amended the order sought by the Commission, on the basis of the established principle that, ‘where Community law is amended during the course of the pre-litigation procedure, the Commission has standing to seek a declaration that a Member State has failed to fulfil obligations which were created in the initial version of a Community measure, subsequently amended or repealed, and which were maintained in force under the new provisions’. (8) 24. There would seem to be no basis, therefore, on which the admissibility of the Commission’s application could be questioned for seeking an order with respect to a regulation that was not yet in force, given that the pertinent substantive provisions of Regulations Nos 1775/2005 and 715/2009 are identical in substance. 25. However, as the latter regulation was adopted in the context of the Third Energy Package, which represented a more ambitious approach toward realisation of the internal market in gas, from a teleological perspective only the objectives of the earlier regulation, namely Regulation No 1775/2005, can be taken into account in interpreting Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009, or rather their predecessor provisions, namely Articles 4(1) and 5(1) and (2)(b) of Regulation No 1775/2005. 26. The Republic of Bulgaria asks the Court to dismiss the action as inadmissible on other grounds. It argues that, because of discrepancies between the complaint made by the Commission in the administrative procedure and that presented in its application to the Court, it could not identify the precise obligation it supposedly failed to comply with, and that accordingly it was unable to mount an effective defence against the complaints of the Commission. 27. In essence, the Republic of Bulgaria argues that the letter of formal notice and reasoned opinion issued by the Commission was based on the failure of Bulgaria to provide physical reverse flow capacity, while the Commission’s application before the Court was concerned with failure to provide virtual reverse flow capacity (backhaul). Thus the subject matter of the application was different from the subject matter presented in the administrative procedure. 28. In my opinion there is no basis on which the Commission’s action could be declared inadmissible due to discord among the relevant documents. I am of this view because reference is made to virtual back haul in the letter of formal notice, the reasoned opinion, and in the application lodged at the Court. Moreover, under the Court’s established case-law, the Commission is entitled to limit the scope of its complaints in its application before the Court, as compared with arguments raised in the reasoned opinion and in the letter of formal notice. (9) 29. I also recall that, in any event, the Court’s case-law does not require the three stages of the proceedings (namely letter of formal notice, reasoned opinion, and application to the Court) to perfectly accord with one another. Provided that the subject of the litigation, as it is presented in the reasoned opinion, is not extended or altered in the application brought to the Court, the Commission will have met the procedural obligations imposed on it by EU law. (10) Notwithstanding the change of the allegedly infringed provisions to those of Regulation No 715/2009, the Commission has complied with this rule in this case. 30. For the sake of completeness, I would add that I reject as irrelevant the reference made in the Commission’s reply to the fact that the Republic of Bulgaria did not contest, in the administrative phase, whether the combined effect of Articles 4(1) and 5(1) and (2)(b) and of Regulation No 1775/2005 (Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009) require it to provide reverse flow capacities on an interruptible basis, virtual or otherwise. As pointed out in the defence of the Republic of Bulgaria, a Member State is entitled to invoke, to ensure the right of the defence, arguments in the contentious part of the procedure that have not been raised in the pre-contentious part. (11) 31. For these reasons I find that the Commission’s application is admissible. 2. Issues appertaining to the interpretation of Article 14(1) and 16(1) and (2)(b) of Regulation No 715/2009 32. The core of this case lies in ascertaining whether the obligation to maximise capacity, taking into account efficient network operation, implies a specific obligation to provide for virtual reverse capacity. If the answer to this question is ‘no’, then all of the arguments put to the Court by the parties, and which I have outlined above, become redundant. Therefore the case to hand amounts, at least initially, to an exercise in interpretation of Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009. I recall that according to the settled case-law of the Court, in determining the meaning of a provision of EU law, its context, wording and objectives must all be taken into account. (12) – Context and wording 33. As has been pointed out in the defence of the Republic of Bulgaria, neither Regulation No 715/2009 nor Regulation No 1775/2005 make an express reference to an obligation on TSOs to provide virtual reverse haul gas transmission services. 34. I would add that Regulation No 715/2009 defines, in its Article 2(1)(3), ‘capacity’ as ‘the maximum flow, expressed in normal cubic meters per time unit or in energy unit per time unit, to which the network user is entitled in accordance with the provisions of the transport contract’. Furthermore, according to Article 2(1)(18), ‘technical capacity’ means the maximum firm capacity that the transmission system operator can offer to the network users, taking account of system integrity and the operational requirements of the transmission network. Neither these nor any other of the numerous provisions where the word ‘capacity’ is used in Regulation No 715/2009 give any indications that the term would also include virtual flows. As I have explained in point 1 of this opinion, this means in physical terms, non-movement of gas. 35. Indeed, the definition of available capacity in Article 2(1)(20) of Regulation No 715/2009 is most revealing. It states that ‘available capacity’ means the part of the technical capacity, i.e. maximum firm capacity, that is not allocated and is still available to the system at that moment. As the point of reverse virtual flow is to increase the available capacity in the main direction by subtracting from it gas sold in the reverse direction, one would have expected the definition of ‘available capacity’ to have made reference to reverse flows and not just technical capacity. And this even more because the provision of virtual reverse flows, as emphasised by the Commission, indeed allows provision of capacity in the main direction of the network that exceeds its technical capacity. 36. I have particular difficulties with the notion that reducing the physical flow of gas by recourse to virtual supply can be in keeping with the normal meaning of increasing transport capacity of a network or pipe-line. In my opinion, it is akin to saying that discouraging consigners of freight to make physical use of railway networks would be a means of maximising their capacity for transport of goods. In fact, various commercial techniques aiming at minimising the need to transport commodities, securities or money between places A and B by subtracting flows from B to A, from flows from A to B, were known in Europe as far back as the Middle Ages. However, such techniques are not a means of maximizing the capacity of transport networks but a commercial means of circumventing the inconvenience caused when transport is scarce. 37. In my opinion, maximum capacity, within the meaning of Article 16(1) of Regulation No 715/2009, refers to available capacity in the sense of technical capacity of the network that has not yet been allocated and is therefore available, or is available because network users have unused contracted capacity. In other words, the TSOs are not allowed to let some of the technical capacity of the network lay idle. Such capacity has to be offered to market participants in a non-discriminatory manner. This interpretation is confirmed by the title of the article referring to principles of capacity-allocation mechanisms and congestion-management procedures concerning TSOs (that is Article 16 of Regulation 715/2009) and the provisions of the article regulating the problems relating to contractual or physical congestion of the network. 38. It is true that paragraph 5 of Article 16 of Regulation No 715/2009 implicitly refers to ‘maximising’ the capacity of a network in the sense of creation of new transmission capacities by means of new investments, the demand for which the TSO is obliged to regularly assess. However, this provision, which did not exist under Article 5 of Regulation No 1775/2005, clearly relates to technical capacity of the network and, moreover, does not include any legal obligation to increase such capacity. 39. As to the relationship between Article 14(1) and Article 16(1) and (2)(b) of Regulation No 715/2009, I recall that the first mentioned provision obliges TSOs to offer services on a non-discriminatory basis to all network users, and provide both firm and interruptible third-party access services. These obligations do not support the interpretation of Article 16(1) and (2)(b) of Regulation No 715/2009 advanced by the Commission. 40. In my opinion the duty of non-discrimination does not require a TSO to provide new services. It simply requires it to abstain from discriminating between the network users in the provision of its existing services. Nor does the duty of a TSO to provide interruptible services mean that it must provide any conceivable network service that can be provided on an interruptible basis. Here I would note that for technical reasons, backhaul can only be offered on an interruptible basis. (13) For these reasons, a duty to provide backhaul service on the basis of virtual reverse flows cannot be derived from Article 16(1) and 2(b) when read together with Article 14(1) of Regulation No 715/2009. 41. Finally, the reference to network efficiency in Article 16(1) of Regulation No 715/2009, which the Commission invokes as an argument supporting its complaint, is provided there, together with system integrity, as a possible factor that needs to be taken into account when maximum capacity is made available to market participants at all relevant points of the network, which according to Article 18(3) include entry and exit points. In my opinion the reference to network efficiency actually represents a condition limiting the available capacity, not a factor that requires it to be maximised. In other words, a TSO does not need to stress the available capacity to a point where it would endanger network efficiency. – Objectives 42. There does not seem to be any indication in the travaux preparatoires of either Regulation No 1775/2005 or Regulation No 715/2009 to show that an obligation to provide backhaul in the form of virtual reverse flow service was encapsulated in either of these regulations. (14) Contrary to what was contended by the Commission at the hearing, in my opinion the objectives of the Third Energy Package cannot be relevant to the assessment of the Member State’s obligations in relation to the provision of such backhaul. This is so because the legislative proposals forming that package were adopted in September 2007. (15) Therefore they cannot affect the interpretation of the provisions of Regulation No 1775/2005 on which the letter of formal notice and the reasoned opinion were based. If they did, then there would be discord between administrative procedure and the Commission’s action in infringement of the Republic of Bulgaria’s rights of defence. 43. Furthermore, as was pointed out in the defence of Bulgaria, Article 6(5) of Regulation No 994/2010 obliges TSOs to put in place bi-directional capacity on all trans-frontier connections between Member States by 3 December 2013, save for in the case of specific exceptions. It is difficult, therefore, to avoid the conclusion that if the EU legislature had sought to introduce bi-directional capacity, virtual or otherwise, in Regulation No 715/2009 or Regulation No 1775/2005, it would have made express provision for it in the same way as has occurred in Regulation No 994/2010. 44. As has been pointed out by the Commission, it is true that, under the Court’s established case-law, when a provision of EU law is susceptible to more than one interpretation, the meaning should be given which renders the provision in conformity with the Treaty, in preference to any meaning that would be incompatible with it. (16) 45. I am also mindful of the fact that the internal market forms the legal impetus for Regulation No 1775/2005 which seeks to create such a market in natural gas. I also note that recital 12 of Regulation No 715/2009 states that a ‘sufficient level of cross-border gas interconnection capacity should be achieved and market integration fostered in order to complete the internal market in natural gas.’ However, this recital did not appear in Regulation No 1775/2005, and therefore it cannot be taken into account in the assessment of the alleged infringement of the Republic of Bulgaria as the relevant date falls in August 2010 (see point 22 above). One should also note that the obligation of TSOs to ‘facilitate cross-border exchanges in natural gas’, included in Article 16(2)(a) of Regulation No 715/2009 in fine did not appear in the corresponding provision of Regulation No 1775/2005, namely Article 5(2)(a). 46. According to the case-law, the Court cannot, in the face of clear and precise wording of an EU legislative act, interpret the provision with the intention of correcting it and thereby extending the obligations of the Member States relating to it. (17) 47. Thus, I am unable to conclude that a requirement to provide counter-flow capacities, virtual or otherwise, can be read from the combination of Article 14(1) and 16(1) and (2)(b) of Regulation No 715/2009, no matter which method of interpretation is employed. As I have already mentioned, the expressly worded obligation appearing in Regulation No 994/2010 to create a physical bi-directional capacity in the transmission of gas renders it all the more difficult to read a duty to provide virtual counter-flow capacities into Articles 14(1) and 16(1) and (2)(b) of Regulation No 715/2009. 48. Finally, given the conclusion that I have reached on the absence of an EU law obligation on TSOs to provide backhaul in the form of virtual reverse flow capacity, it is unnecessary to consider whether the Commission has met the evidential threshold of establishing the infringement, (18) or the other arguments raised by the Republic of Bulgaria on the difficulties confronted by it in supplying virtual reverse flow on an interruptible basis, from both a technical perspective and in the light of its pre-accession international obligations. V – Conclusion 49. I therefore propose that the Court should dismiss the Commission’s action and order the Commission to pay the costs. 1 – Original language: English. 2 – OJ 2009 L 211, p. 36. See also corrigendum to Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005, OJ 2009 L 229, p. 29. 3 – OJ 2005 L 289, p. 1. 4 – In a situation where a reverse virtual flow of 20 units has already been agreed to, a TSO could accept reservations of the capacity in the main direction of up to 120 units, even if the physical capacity of the pipeline were only 100 units (as the first mentioned 20 units are subtracted from the reserved main flow capacity of 120 units). 5 – The file does not contain a copy of the reference page that was accessible as at the relevant date, namely 28 August 2010, two months after the communication of the Commission’s reasoned opinion. At present, the address mentioned in the action and in the defence of the Republic of Bulgaria does not seem to be accessible to the public. See http://www.bulgartransgaz.bg/UserFiles/File/reverse_bg.pdf 6 – OJ 2010 L 295, p. 1. 7 – Case C‑363/00 Commission v Italy [2003] ECR I‑5767, paragraph 21. 8 – Commission v Italy, paragraph 22. I would note that, in other cases in which the relevant EU legislation has been amended between the administrative and judicial phases of an infringement action brought by the Commission against a Member State, the Commission has referred, in the form of order sought, to both the version of the relevant EU law in force during the administrative procedure, and the version mentioned in the litigation phase. See e.g. Case C‑53/08 Commission v Austria [2011] ECR I‑4309, paragraph 1, and the form of order sought published in OJ 2008 C 107 p. 15; Case C‑54/08 Commission v Germany [2011] ECR I‑4355, paragraph 1 and the form of order sought published in OJ 2008 C 107, p. 16; Case C‑416/07 Commission v Greece [2009] ECR I‑7883, paragraph 1 and the form of order sought published in OJ 2007 C 283, p. 16. 9 – The Court stated in C‑279/94 Commission v Italy [1997] ECR I‑4743, paragraph 25 that ‘… that requirement [appertaining to the fact that the Commission’s reasoned opinion and the application must be based on the same complaints] cannot be stretched so far as to mean that in every case the statement of the subject-matter of the proceedings in the reasoned opinion must be exactly the same as the form of order sought in the application if the subject-matter of the proceedings has not been extended or altered but simply limited’. See also Case C‑203/03 Commission v Austria [2005] ECR I‑935, paragraph 29; Case C‑177/04 Commission v France [2006] ECR I‑2461, paragraph 37; Case C‑441/02 Commission v Germany [2006] ECR I‑3449, paragraph 61. 10 – C‑171/08 Commission v Portugal [2010] ECR I‑6817. 11 – Eg Case C‑414/97 Commission v Spain [1999] ECR I‑5585, paragraph 19. 12 – See Case C‑174/08 NCC Construction Danmark [2009] ECR I‑10567, paragraph 23, and Case C‑33/11 A [2012] ECR, paragraph 27; see also point 28 of my opinion of 27 November 2012 in Case C‑85/11 Commission v Ireland [2013] ECR. 13 – Virtual reverse flow is dependent on a main flow of the same or larger quantity. Therefore it can be offered only on an interruptible service. 14 – Indeed, the agent for the Commission was asked, at the hearing, to indicate where in the legislative history of these regulations an intention on the part of the EU legislature could be found to impose an obligation to provide backhaul on a virtual basis. The agent was unable to point to any such evidence. 15 – See in particular the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1775/2005 on conditions for access to the natural gas transmission networks COM(2007) 532. 16 – Case 218/82 Commission v Council [1983] ECR 4063, paragraph 15. 17 – Case C‑582/08 Commission v United Kingdom [2010] ECR I‑7195, paragraph 51. 18 – See e.g. Case 96/81 Commission v Netherlands [1982] ECR 1791, paragraph 6; Case C‑246/08 Commission v Finland [2009] ECR I‑10605, paragraph 52.