62011CC0267
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 31 January 2013 (
1
)
Case C‑267/11 P
European Commission
v
Republic of Latvia
Intervener:
Czech Republic
‛Appeal — Directive 2003/87/EC — Scheme for greenhouse gas emission allowance trading — National allocation plan for emission allowances for Latvia for the period from 2008 to 2012 — New plan — Silence on the part of the Commission’
I – Introduction
1.
Under the version of Directive 2003/87 on greenhouse gas emission allowance trading (
2
) which is relevant to the present case, the Member States were required to develop national allocation plans for emission allowances and to submit them to the Commission. The Commission could reject the plan wholly or in part within three months. In settled case-law, the General Court held that the plan became definitive and there was a presumption of legality allowing the Member State to implement it if the Commission did not state its position within the prescribed period. (
3
)
2.
In the present case, the Commission initially rejected the Latvian plan for the period from 2008 to 2012 in good time. Subsequently, Latvia notified a new plan which provided inter alia for the allocation of many more emission allowances than the Commission had allowed in its first decision.
3.
The Commission did not reject that plan within three months, but much later. The General Court found, in connection with Latvia’s application, that the new Latvian plan had become definitive upon the expiry of the three-month period and annulled the Commission’s second rejection decision. (
4
)
4.
The Commission is appealing against that judgment. It is necessary to clarify whether such a second draft plan becomes definitive three months after notification if the Commission raises no objection.
II – Legislative framework
5.
Directive 2003/87 implements international agreements on climate protection. These are the United Nations Framework Convention on Climate Change, which was adopted on 9 May 1992 in New York and approved on behalf of the European Community by Decision 94/69/EC, (
5
) and the Kyoto Protocol to the Framework Convention, which was adopted on 11 December 1997 (Decision 1/CP.3:‘Adoption of the Kyoto Protocol to the … Framework Convention …’) and approved by Decision 2002/358/EC. (
6
)
6.
Article 1 of Directive 2003/87 provides:
‘This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’
7.
Article 9 of Directive 2003/87 states:
‘1.   For each period referred to in Article 11(1) and (2), each Member State shall develop a national plan stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. The plan shall be based on objective and transparent criteria, including those listed in Annex III, taking due account of comments from the public. The Commission shall, without prejudice to the Treaty, by 31 December 2003 at the latest develop guidance on the implementation of the criteria listed in Annex III.
For the period referred to in Article 11(1), the plan shall be published and notified to the Commission and to the other Member States by 31 March 2004 at the latest. For subsequent periods, the plan shall be published and notified to the Commission and to the other Member States at least 18 months before the beginning of the relevant period.
2. …
3.   Within three months of notification of a national allocation plan by a Member State under paragraph 1, the Commission may reject that plan, or any aspect thereof, on the basis that it is incompatible with the criteria listed in Annex III or with Article 10. The Member State shall only take a decision under Article 11(1) or (2) if proposed amendments are accepted by the Commission. Reasons shall be given for any rejection decision by the Commission.’
8.
Article 11(2) of Directive 2003/87 provides:
‘For the five-year period beginning 1 January 2008, and for each subsequent five-year period, each Member State shall decide upon the total quantity of allowances it will allocate for that period and initiate the process for the allocation of those allowances to the operator of each installation. This decision shall be taken at least 12 months before the beginning of the relevant period and be based on the Member State’s national allocation plan developed pursuant to Article 9 and in accordance with Article 10, taking due account of comments from the public.’
9.
Annex III of Directive 2003/87 sets out twelve criteria which apply to national allocation plans. Criteria 1 to 3 of Annex III provide:
‘1.
The total quantity of allowances to be allocated for the relevant period shall be consistent with the Member State’s obligation to limit its emissions pursuant to Decision 2002/358/EC and the Kyoto Protocol, taking into account, on the one hand, the proportion of overall emissions that these allowances represent in comparison with emissions from sources not covered by this Directive and, on the other hand, national energy policies, and should be consistent with the national climate change programme. The total quantity of allowances to be allocated shall not be more than is likely to be needed for the strict application of the criteria of this Annex. Prior to 2008, the quantity shall be consistent with a path towards achieving or over-achieving each Member State’s target under Decision 2002/358/EC and the Kyoto Protocol.
2.
The total quantity of allowances to be allocated shall be consistent with assessments of actual and projected progress towards fulfilling the Member States’ contributions to the Community’s commitments made pursuant to Decision 93/389/EEC.
3.
Quantities of allowances to be allocated shall be consistent with the potential, including the technological potential, of activities covered by this scheme to reduce emissions. Member States may base their distribution of allowances on average emissions of greenhouse gases by product in each activity and achievable progress in each activity.’
III – Background to the dispute
10.
By letter of 16 August 2006, the Republic of Latvia notified the Commission of the European Communities, in accordance with Article 9(1) of Directive 2003/87, of its national allocation plan for emission alliances for the period from 2008 to 2012 (‘NAP’). According to the NAP, the Republic of Latvia intended to allocate to its national industry covered by Annex I to the Directive an average annual total of 7.763883 million tonnes-equivalent of carbon dioxide (‘MteCO 2’).
11.
The Commission rejected that plan on 29 November 2006. It requested that the total quantity of allowances to be allocated for the purposes of the Community scheme be reduced by 4.480580 MteCO 2 to 3.283303 MteCO 2.
12.
By letter of 29 December 2006, the Republic of Latvia notified the Commission of a revised NAP providing for a total annual average of 6.253146 MteCO 2.
13.
By letter of 30 March 2007, written in English, the Commission found that some of the information in the revised NAP was incomplete and requested the Republic of Latvia to answer certain questions and to provide it with additional information. After Latvia had responded, on 13 July 2007 the Commission adopted Decision C(2007) 3409 on the amendment of the national plan for the allocation of greenhouse gas emission allowances notified by the Republic of Latvia for the period from 2008 to 2012, under Directive 2003/87 (‘the contested decision’). It found that the allocation of allowances under the plan exceeded the permissible total quantity by 2.825030 MteCO 2.
IV – Procedure before the General Court and forms of order sought
14.
Latvia brought an action against the contested decision and was supported by Lithuania and Slovakia. The United Kingdom intervened in support of the Commission.
15.
The General Court dealt with just one of the four pleas in law, namely the complaint that the Commission had not taken a decision within the prescribed period. It found that the new Latvian NAP became definitive upon the expiry of three months from its notification since the Commission had raised no timeous objection. It therefore annulled the contested decision by judgment of 22 March 2011 in Case T‑369/07 Latvia v Commission (‘the judgment under appeal’).
16.
The Commission is appealing against that judgment and claims that the Court should:
(1)
set aside the judgment under appeal; an
(2)
order the Republic of Latvia to pay the costs.
17.
The Republic of Latvia contends that the Court should dismiss the appeal.
18.
The application brought by Latvia is supported by the Czech Republic, which was granted leave to intervene by the President of the Court of Justice by order of 29 September 2011.
19.
The parties submitted written observations and – with the exception of the Czech Republic – presented oral argument on 16 January 2013.
V – Legal assessment
A – The appeal
20.
Under the version of Directive 2003/87 which is applicable in the main proceedings, the Member States must develop NAPs for certain periods, in this case from 2008 to 2012. They must notify the NAPs to the Commission, which may, under the first sentence of Article 9(3) of Directive 2003/87, reject them within three months if they are not compatible with certain criteria. If the Commission does not reject the plans, they form the basis for the allocation of emission allowances to the undertakings covered by the directive.
21.
This appeal concerns the handling of the second draft of an NAP, which Latvia notified after the Commission had rejected a first draft. The Commission objects in particular that the General Court assessed the contested decision on this second NAP on the basis of the same criteria as the decision on a first plan. I will therefore first explain the General Court’s case-law on the decision on a first draft plan under the first sentence of Article 9(3) of Directive 2003/87 and then examine whether it can also apply to the decision on a second draft plan.
1. The decision on a first draft plan
22.
The first sentence of Article 9(3) of Directive 2003/87 does not expressly regulate the consequences of a case where the Commission does not state its position on a notified plan within three months.
23.
With regard to a first notified plan, however, the General Court stated in paragraph 47 of the judgment under appeal with reference to its settled case-law, that if the Commission does not take a rejection decision within the prescribed period, it becomes definitive and there is a presumption of legality allowing the Member State to implement it.
24.
This finding seems surprising at first glance. Similar provision is made in EU law only exceptionally, in the rules on State aid and in merger control. In those instances, it is expressly provided that a notified measure, that is to say, aid or a concentration between undertakings, is deemed to have been authorised if the Commission does not take its position within the prescribed period. (
7
) By contrast, Article 9(3) of Directive 2003/87 does not contain any express provision to that effect. However, the fiction of approval with regard to the preliminary examination by the Commission under the rules on State aid was also not originally based on an express provision, but on the case-law of the Court of Justice, which had regard to the urgency of that examination. (
8
)
25.
The case-law of the General Court in relation to the first sentence of Article 9(3) of Directive 2003/87 is based on the Commission’s limited power of review with regard to NAPs (
9
) and on the urgency to which that review by the Commission is subject. (
10
)
26.
The narrow limits of the Commission’s powers under the first sentence of Article 9(3) of Directive 2003/87 can be seen in particular from the fact that, according to the wording of that provision, it is authorised only to reject a plan within the three-month period and may also rely in this regard only on certain criteria. Furthermore, under the third sentence of Article 9(3), reasons must be given for a rejection. Conversely, approval of the plan is not necessary.
27.
The need for the time limit is apparent from the timetable under Directive 2003/87, which is emphasised by Latvia and the Czech Republic. Under that timetable, plans are to be notified to the Commission at least 18 months before the beginning of the relevant period (
11
) and implemented no later than 12 months before the beginning of the period through an allocation of emission allowances. (
12
)
28.
If the Commission exceeds the prescribed period for taking its decision, it is therefore to be feared that the Member State concerned will not be able to respect the time limit imposed on it for implementing the plan. If the development of the plan is significantly delayed, as in the present case, it is even to be feared that the allocation period will begin before a definitive plan exists. This is not expressly provided for in Directive 2003/87. It could, in certain circumstances be interpreted as meaning that the sectors of industry in question in the Member State may not release any greenhouse gases at all until a plan is adopted and implemented.
29.
The fiction that a first plan is approved following the expiry of the prescribed period which the General Court has adopted in its case‑law is therefore not without a certain logic in principle. However, there is no need to decide in the present case whether it may continue to apply, as the Commission does not call it into question.
2. The legal basis for the decision on a second draft plan
30.
Rather, the Commission objects to the findings made by the General Court in paragraphs 52 to 57 of the judgment under appeal to the effect that Latvia had submitted a new plan which the Commission had to subject to a fresh examination – like the first notified plan – under the first sentence of Article 9(3) of Directive 2003/87.
31.
The General Court took the view, supported by Latvia and the Czech Republic, that the notification of a second, revised plan is not significantly different from the notification of a first plan. The time limit laid down in the first sentence of Article 9(3) of Directive 2003/87 must therefore apply equally with regard to the notification of both plans.
32.
The Commission contends that it took a decision pursuant to the second sentence of Article 9(3) of Directive 2003/87 which is not subject to any time limit.
33.
The content of that provision is not unambiguous. It provides that the Member State must only take a decision under Article 11(1) or (2) only if the Commission accepts proposed amendments. These decisions by the Member State concern the implementation of the plan.
34.
On the basis of the wording of the second sentence of Article 9(3) of Directive 2003/87, it could be thought, regarded in isolation, that a plan may be implemented only if – first – amendments are proposed and – second – the Commission accepts them. Such an interpretation would be absurd, however. Why should it be necessary to amend each plan with the approval of the Commission in order to implement it? It is clear that a plan which does not require amendment can be directly implemented.
35.
Rather, the meaning of that provision is clear from its context, and in particular from the connection with the first sentence of Article 9(3) of Directive 2003/87. Only the amendment of plans within the meaning of that provision can be relevant. There are two cases where this applies, namely the amendment of plans to which the Commission has objected and the amendment of plans to which it has not objected.
36.
The latter case is simple. It is clear that Member States may not amend plans to which the Commission has not objected without the participation of the Commission. They could otherwise circumvent the first sentence of Article 9(3) of Directive 2003/87. Amendments may therefore be made only once they have been accepted by the Commission.
37.
In that case, the absence of a time limit in the second sentence of Article 9(3) of Directive 2003/87 is relatively unproblematic, as the Commission and the Member State have already agreed on a plan in principle. If necessary, the Member States may implement it first and additionally take any amendments into consideration subsequently after the Commission has given its approval. It should therefore be sufficient if the Commission conducts the procedure without unnecessary delays.
38.
But the amendment of a plan which has been rejected by the Commission is different in nature. It is necessary in order to overcome the Commission’s objections. There is however considerable urgency, which is much greater than for the decision on the original draft plan: the Commission had already objected to the original plan. It is therefore prohibited to implement it provisionally. And the time remaining until the plan begins to apply is even significantly less than after the notification of the first plan.
39.
The General Court therefore applies, in paragraphs 52 to 57 of the judgment under appeal, the time limit laid down under the first sentence of Article 9(3) of Directive 2003/87 and the legal consequence of failure to respect that time limit to any decision which falls to be taken under the second sentence: any notification, whether it is a draft plan or amendments, sets the period in motion. If the Commission does not state its position within the period, amendments would also become definitive.
40.
However, in paragraphs 52 and 53 of the judgment under appeal, the General Court fails to understand that under the wording of the first two sentences of Article 9(3) of Directive 2003/87 the notification of plans and the notification of amendments have different legal consequences. The Commission may only object to a plan, whilst it must approve an amendment before it may be implemented.
41.
The differences between these provisions are based on a significant difference between the first notification of a plan and the notification of amendments. That difference lies in the Commission’s decision on the first draft plan.
42.
In the grounds for that decision the Commission has already set out its position. In the present case, it had requested in particular that the total quantity of allowances of 7.763883 MteCO 2 per year to be allocated for the purposes of the Community scheme be reduced by 4.480580 MteCO 2 and that the average total quantity of allowances to be allocated each year be limited to 3.283303 MteCO 2.
43.
The Commission had already given notification, in Articles 2 and 3(2) of its first decision, that it would not object to amendments to that effect. With regard to other proposed amendments, however, it pointed out in Article 3(3) that they required approval.
44.
The revised plan envisaged allocating almost twice as many allowances as the Commission considered to be permissible, namely an average of 6.253146 MteCO 2 per year. It is therefore difficult to imagine that the Commission would simply approve that plan.
45.
Contrary to the view taken by the General Court in paragraphs 54 and 55 of the judgment under appeal, the notion of legal certainty does not lead to a different conclusion. Rather, it is consistent with the principle of legal certainty to follow the findings of the first Commission decision, which was not contested by Latvia.
46.
The fiction of approval which is inconsistent with an earlier decision also could not be justified by the urgency of a decision on the second plan. The General Court does rightly underline, in paragraphs 54 and 55 of the judgment under appeal, the Member States’ interest in a quick decision by the Commission. However, if a Member State fails to challenge a first rejection decision and then submits a new draft plan which is also manifestly incompatible with that decision, it cannot expect the Commission to approve that draft without objections.
47.
Furthermore, the period of three months, may, depending on the circumstances, even prove to be too short. If the Member State and the Commission cannot reach agreement for some time, it may even become necessary to respond within much shorter time limits.
48.
It appears very doubtful that the Commission acted with the necessary speed in the present case. However, the consequence cannot be to assume approval which is inconsistent with its earlier decision. Instead, Latvia could have brought an action for failure to act under Article 265 TFEU and possibly also have sought interim relief.
49.
Consequently, the judgment of the General Court is incorrect in law in so far as, in paragraph 60, it found that the second plan notified by Latvia became definitive upon the expiry of the period of three months.
50.
The General Court should therefore not have upheld this plea in law raised by Latvia and the judgment under appeal must be set aside.
B – The action before the General Court
51.
Pursuant to the second sentence of the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, if it quashes the decision of the General Court, the Court of Justice may itself give final judgment in the matter, where the state of the proceedings so permits.
52.
This would undoubtedly be the case if Latvia had based its action on a misuse of the Commission’s powers under Article 9(3) of Directive 2003/87. The Court has already ruled with regard to Estonia and Poland that the Commission is not authorised, as in the present case, to fix an emission ceiling on the basis of its own model calculations. (
13
) However, because Latvia failed to raise this objection, it is in the same position as the other 24 Member States which did not challenge the Commission’s decisions on their NAPs from 2008 to 2012, even though it must be assumed that those decisions are vitiated by the same legal defects.
53.
Before the General Court, Latvia instead based its action on four other pleas in law: first, infringement of the spheres of competence laid down by the EC Treaty in regard to energy policy; second, infringement of the principle of non-discrimination; third, disregard of the obligations laid down under the Kyoto Protocol; and, fourth, non-compliance with the three-month time limit provided for in Article 9(3) of Directive 2003/87.
54.
In the light of the foregoing, the fourth plea in law cannot be upheld. The other pleas in law were not considered either by the General Court or before the Court of Justice. In my view, the third plea in law can be rejected, but the first two pleas in law cannot be the subject of a ruling. Specifically:
1. The first plea in law
55.
By the first plea in law, Latvia claimed that the Commission’s decision encroached on the Member States’ residual powers in the field of energy policy under Article 175(2)(c) of the EC Treaty (now Article 192(2)(c) TFEU). Under that provision, environmental measures significantly affecting a Member State’s choice between different energy sources and the general structure of its energy supply require a unanimous decision by the Council after consulting the Parliament. By contrast, the legal basis of Directive 2003/87, Article 175(1) of the EC Treaty (now Article 192(1) TFEU), lays down the co-decision procedure, which corresponds to the present ordinary legislative procedure.
56.
The Commission rightly contests this argument on the basis that its decision is based solely on Directive 2003/87. However, Latvia’s argument is to be construed to the effect that the Commission may not interpret and apply the directive in such a way that it should have been based on Article 192(2)(c) TFEU.
57.
According to settled case-law, the choice of the legal basis for a Union measure must rest on objective factors amenable to judicial review, which include the aim and content of that measure. If a measure pursues two aims or has two components and if one of those aims or components is identifiable as the main one, whereas the other is merely incidental, the measure must be founded on a single legal basis, namely, that required by the main or predominant aim or component. (
14
)
58.
The Commission was not therefore permitted, in the contested decision, to interpret or apply Directive 2003/87 in such a way that the primary result of the application of the directive would be that it had a significant effect on a Member State’s choice between different energy sources and the general structure of its energy supply. By contrast, its legal basis would not be called into question if such an effect, even where it is significant, were only a secondary component or aim, a kind of side-effect of the directive.
59.
The question whether in the contested decision the Commission relied on an interpretation of Directive 2003/87 which is incompatible with its legal basis cannot be decided without reference to its second defence submission. It contends that the contested decision does not significantly affect Latvia’s choice between different energy sources and the general structure of its energy supply.
60.
In order to consider this argument, the Court would have to assess factual submissions of the parties. Since this is the task of the General Court, this plea in law cannot be the subject of a ruling. (
15
)
2. The second plea in law
61.
Latvia based the second plea in law on the claim that the evaluation method used by the Commission disadvantages Member States with low emissions. The Commission disputes that claim.
62.
Since this plea in law also requires consideration of the factual submissions of the parties, it likewise cannot be the subject of a ruling.
3. The third plea in law
63.
Lastly, Latvia claimed that it had complied with its obligations under the Kyoto Protocol. The Commission required a more extensive limitation of greenhouse gas emissions. Latvia argued that this would be incompatible with point 1 of Annex III of Directive 2003/87, under which the NAP must be consistent with the obligations under the Protocol.
64.
However, the Commission rightly contends that Annex III of Directive 2003/87 contains requirements for the NAP which go further than the Protocol. In particular, points 2 and 3 of Annex III require that achievable progress in reducing emissions must form the basis for the allocation. That reduction is not therefore limited by the obligations under the Kyoto Protocol.
65.
This plea in law cannot therefore be upheld and must be rejected.
4. Conclusion
66.
It follows that the case must be referred back to the General Court for judgment on the first two pleas in law raised by Latvia.
VI – Costs
67.
Since the cases are to be referred back to the General Court, it is appropriate to reserve the costs relating to the present appeal proceedings. (
16
)
VII – Conclusion
68.
I therefore propose that the Court should rule as follows:
(1)
The judgment of the General Court of the European Union of 22 March 2011 in Case T‑369/07 Republic of Latvia v European Commission is set aside.
(2)
The case is referred back to the General Court of the European Union for it to give judgment on the first two pleas in law raised by Latvia.
(3)
The costs are reserved
(
1
)	Original language: German.
(
2
)	Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32), as amended by Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 (OJ 2004 L 338, p. 18). Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (OJ 2009 L 140, p. 63) abolished the procedure under examination in the present case and accorded the Commission wider powers.
(
3
)	Case T-178/05 United Kingdom v Commission [2005] ECR II-4807, paragraph 55; Case T-369/07 Latvia v Commission [2011] ECR II-1039, paragraph 47; and order in Case T-387/04 EnBW Energie Baden-Württemberg v Commission [2007] ECR II-1195, paragraph 115.
(
4
)	Latvia v Commission, cited in footnote 3.
(
5
)	Council Decision of 15 December 1993 concerning the conclusion of the Framework Convention (OJ 1994 L 33, p. 11).
(
6
)	Council Decision of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (OJ 2002 L 130, p. 1).
(
7
)	See Article 4(6) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1) and Article 10(6) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1).
(
8
)	Case 120/73 Lorenz [1973] ECR 1471, paragraph 4.
(
9
)	The limits of the Commission’s powers of review established by the General Court were confirmed in principle in Case C‑504/09 P Commission v Poland [2012] ECR and in Case C‑505/09 P Commission v Estonia [2012] ECR.
(
10
)	Paragraph 54 of the judgment under appeal.
(
11
)	Article 9(1) of Directive 2003/87.
(
12
)	Article 11(2) of Directive 2003/87.
(
13
)	Commission v Poland, paragraph 76 et seq., and Commission v Estonia, paragraph 78 et seq., both cited in footnote 9.
(
14
)	Case C-36/98 Spain v Council [2001] ECR I-779, paragraph 58 et seq., and Case C‑130/10 Parliament v Council [2012] ECR, paragraph 42 et seq.
(
15
)	Case C‑196/11 P Formula One Licensing v OHIM [2012] ECR, paragraph 57.
(
16
)	Joined Cases C-463/10 P and C-475/10 P Deutsche Post v Commission [2011] ECR I-9639, paragraph 83.