62009CC0241_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
I – Introduction
1. By this reference for a preliminary ruling under Article 234 EC, (2) the Cour d’appel de Bruxelles (Court of Appeal, Brussels) (Belgium) asks whether the provisions of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC, (3) and Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transport networks, (4) preclude a national law which, under the rules governing the tariffs applicable to the transport of natural gas, prescribes separate regimes for natural gas distributed or supplied in Belgium (‘conveyance’; French: ‘acheminement’) and natural gas destined for a place outside Belgium (‘transit’) respectively.
II – Legal framework
A – Community law (5)
2. Council Directive 91/296/EEC of 31 May 1991 on the transit of natural gas through grids (6) sought to promote trade in natural gas between the high-pressure gas transmission grids of European countries. It referred to the ‘compulsory transit’ of natural gas through grids. Article 2(1) of Directive 91/296 defined transit as follows:
‘1. Every transaction for the transport of natural gas under the following conditions shall constitute transit of natural gas between grids, for the purpose of this Directive, without prejudice to any special agreements concluded between the Community and third countries:
(a) transport is carried out by the entity or entities responsible in each Member State for high-pressure natural gas grids, with the exception of distribution grids, in a Member State’s territory which contribute to the efficient operation of European high-pressure interconnections;
(b) the grid of origin or final destination is situated in the Community;
(c) this transport involves the crossing of at least one intra-Community frontier.’
3. Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas (7) laid down the rules relating to the organisation and functioning of the natural gas sector, access to the market, the operation of systems, and the criteria and procedures applicable to the granting of authorisations for transport, distribution, supply and storage of natural gas. It prescribed regulated access, in particular with respect to transmission infrastructures.
4. Directive 2003/55 contains common rules on the internal market in natural gas which are applicable, ratione temporis, to the dispute in the main proceedings. Recitals 2, 6 to 8, 16, 22 and 31 in the preamble to that directive read as follows:
‘(2) 	Experience in implementing this Directive [Directive 98/30] shows the benefits that may result from the internal market in gas, in terms of efficiency gains, price reductions, higher standards of service and increased competitiveness. However, significant shortcomings and possibilities for improving the functioning of the market remain, notably concrete provisions are needed to ensure a level playing field and to reduce the risks of market dominance and predatory behaviour, ensuring non‑discriminatory transmission and distribution tariffs, through access to the network on the basis of tariffs published prior to their entry into force, and ensuring that the rights of small and vulnerable customers are protected.
…
(6) The main obstacles in arriving at a fully operational and competitive internal market relate to, amongst other things, issues of access to the network, access to storage, tarification issues, interoperability between systems and different degrees of market opening between Member States.
(7) For competition to function, network access must be non‑discriminatory, transparent and fairly priced.
(8) In order to complete the internal gas market, non‑discriminatory access to the network of the transmission and distribution system operators is of paramount importance. A transmission or distribution system operator may consist of one or more undertakings.
…
(16) 	National regulatory authorities should be able to fix or approve tariffs, or the methodologies underlying the calculation of the tariffs, on the basis of a proposal by the transmission system operator or distribution system operator(s) or [liquid natural gas (LNG)] system operator, or on the basis of a proposal agreed between these operator(s) and the users of the network. In carrying out these tasks, national regulatory authorities should ensure that transmission and distribution tariffs are non‑discriminatory and cost‑reflective, and should take account of the long-term, marginal, avoided network costs from demand-side management measures.
…
(22) 	Further measures should be taken in order to ensure transparent and non discriminatory tariffs for access to transportation. Those tariffs should be applicable to all users on a non discriminatory basis. Where a storage facility, linepack or ancillary service operates in a sufficiently competitive market, access could be allowed on the basis of transparent and non‑discriminatory market-based mechanisms.
…
(31) 	In the light of the experience gained with the operation of Council Directive 91/296 …, measures should be taken to ensure homogeneous and non‑discriminatory access regimes for transmission, including cross‑border flows of gas between Member States. To ensure homogeneity in the treatment of access to the gas networks, also in the case of transit, that Directive should be repealed, without prejudice to the continuity of contracts concluded under the said Directive. The repeal of Directive 91/296… should not prevent long-term contracts being concluded in the future’.
5. Article 1(1) of Directive 2003/55 states:
‘This Directive establishes common rules for the transport, distribution, supply and storage of natural gas. It lays down the rules relating to the organisation and functioning of the natural gas sector, access to the market, the criteria and procedures applicable to the granting of authorisations for transmission, distribution, supply and storage of natural gas and the operation of systems’.
6. Article 2(3) of that directive defines ‘transport’ as ‘the transport of natural gas through a high pressure pipeline network other than an upstream pipeline network with a view to its delivery to customers, but not including supply’.
7. Article 3(3) and (4) of Directive 2003/55 provides:
‘3. Member States shall take appropriate measures to protect final customers and to ensure high levels of consumer protection, and shall, in particular, ensure that there are adequate safeguards to protect vulnerable customers, including appropriate measures to help them avoid disconnection. In this context, they may take appropriate measures to protect customers in remote areas who are connected to the gas system. Member States may appoint a supplier of last resort for customers connected to the gas network. They shall ensure high levels of consumer protection, particularly with respect to transparency regarding general contractual terms and conditions, general information and dispute settlement mechanisms. Member States shall ensure that the eligible customer is effectively able to switch to a new supplier. As regards at least household customers these measures shall include those set out in Annex A.
4. Member States shall implement appropriate measures to achieve the objectives of social and economic cohesion, environmental protection, which may include means to combat climate change, and security of supply. Such measures may include, in particular, the provision of adequate economic incentives, using, where appropriate, all existing national and Community tools, for the maintenance and construction of necessary network infrastructure, including interconnection capacity’.
8. Under Article 18 of that directive:
‘1. Member States shall ensure the implementation of a system of third party access to the transmission and distribution system, and LNG facilities based on published tariffs, applicable to all eligible customers, including supply undertakings, and applied objectively and without discrimination between system users. Member States shall ensure that these tariffs, or the methodologies underlying their calculation shall be approved prior to their entry into force by a regulatory authority referred to in Article 25(1) and that these tariffs – and the methodologies, where only methodologies are approved – are published prior to their entry into force.
2. Transmission system operators shall, if necessary for the purpose of carrying out their functions including in relation to cross‑border transmission, have access to the network of other transmission system operators.
3. The provisions of this Directive shall not prevent the conclusion of long-term contracts in so far as they comply with Community competition rules’.
9. Article 25(1) of Directive 2003/55 states:
‘1. Member States shall designate one or more competent bodies with the function of regulatory authorities. These authorities shall be wholly independent of the interests of the gas industry. They shall, through the application of this Article, at least be responsible for ensuring non‑discrimination, effective competition and the efficient functioning of the market, …
...’.
10. Under Article 32 of Directive 2003/55:
‘1. Directive 91/296 … shall be repealed with effect from 1 July 2004, without prejudice to contracts concluded pursuant to Article 3(1) of Directive 91/296 …, which shall continue to be valid and to be implemented under the terms of the said Directive.
2. Directive 98/30 … shall be repealed from 1 July 2004, without prejudice to the obligations of Member States concerning the deadlines for transposition and application of the said Directive. References made to the repealed Directive shall be construed as being made to this Directive and should be read in accordance with the correlation table in Annex B’.
11. Regulation No 1775/2005 contains rules on conditions for access to natural gas transmission networks. Recitals 1, 6 and 7 in its preamble read as follows:
‘(1) 	Directive 2003/55 … has made a significant contribution towards the creation of an internal market for gas. It is now necessary to provide for structural changes in the regulatory framework to tackle remaining barriers to the completion of the internal market in particular regarding the trade of gas. Additional technical rules are necessary, in particular regarding third party access services, principles of capacity allocation mechanisms, congestion management procedures and transparency requirements.
…
(6) It is necessary to specify the criteria according to which tariffs for access to the network are determined, in order to ensure that they fully comply with the principle of non‑discrimination and the needs of a well-functioning internal market and take fully into account the need for system integrity and reflect actual costs incurred, insofar as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, whilst including appropriate return on investments, and where appropriate taking account of the benchmarking of tariffs by the regulatory authorities.
(7) In calculating tariffs for access to networks it is important to take account of actual costs incurred, insofar as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, as well as of the need to provide appropriate return on investments and incentives to construct new infrastructure. In this respect, and in particular if effective pipeline-to-pipeline competition exists, the benchmarking of tariffs by the regulatory authorities will be a relevant consideration’.
12. Article 1(1) of Regulation No 1775/2005 defines its objective as follows:
‘1. This Regulation aims at setting non‑discriminatory rules for access conditions to natural gas transmission systems taking into account the specificities of national and regional markets with a view to ensuring the proper functioning of the internal gas market.
This objective shall include the setting of harmonised principles for tariffs, or the methodologies underlying their calculation, for access to the network, the establishment of third party access services and harmonised principles for capacity allocation and congestion management, the determination of transparency requirements, balancing rules and imbalance charges and facilitating capacity trading’.
13. According to Article 2 of that regulation, ‘transport’ means ‘the transport of natural gas through a network, which mainly contains high pressure pipelines, other than an upstream pipeline network and other than the part of high pressure pipelines primarily used in the context of local distribution of natural gas, with a view to its delivery to customers, but not including supply’.
14. Article 3 of Regulation No 1775/2005 concerns tariffs for network access. Under that article:
‘1. Tariffs, or the methodologies used to calculate them, applied by transmission system operators and approved by the regulatory authorities pursuant to Article 25(2) of Directive 2003/55…, as well as tariffs published pursuant to Article 18(1) of that Directive, shall be transparent, take into account the need for system integrity and its improvement and reflect actual costs incurred, insofar as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, whilst including appropriate return on investments, and where appropriate taking account of the benchmarking of tariffs by the regulatory authorities. Tariffs, or the methodologies used to calculate them, shall be applied in a non‑discriminatory manner.
Member States may decide that tariffs may also be determined through market‑based arrangements, such as auctions, provided that such arrangements and the revenues arising therefrom are approved by the regulatory authority.
Tariffs, or the methodologies used to calculate them, shall facilitate efficient gas trade and competition, while at the same time avoiding cross‑subsidies between network users and providing incentives for investment and maintaining or creating interoperability for transmission networks.
2. Tariffs for network access shall not restrict market liquidity nor distort trade across borders of different transmission systems. Where differences in tariff structures or balancing mechanisms would hamper trade across transmission systems, and notwithstanding Article 25(2) of Directive 2003/55…, transmission system operators shall, in close cooperation with the relevant national authorities, actively pursue convergence of tariff structures and charging principles including in relation to balancing’.
15. Article 6 of the same regulation provides:
‘1. Transmission system operators shall make public detailed information regarding the services they offer and the relevant conditions applied, together with the technical information necessary for network users to gain effective network access.
2. In order to ensure transparent, objective and non‑discriminatory tariffs and facilitate efficient utilisation of the gas network, transmission system operators or relevant national authorities shall publish reasonably and suffic iently detailed information on tariff derivation, methodology and structure.
3. For the services provided, each transmission system operator shall make public information on technical, contracted and available capacities on a numerical basis for all relevant points including entry and exit points on a regular and rolling basis and in a user-friendly standardised manner.
…
6. Transmission system operators shall always disclose the information required by this Regulation in a meaningful, quantifiably clear and easily accessible way and on a non‑discriminatory basis’.
16. Under Article 16 of Regulation No 1775/2005:
‘This Regulation shall not apply to:
(a) natural gas transmission systems situated in Member States for the duration of derogations granted under Article 28 of Directive 2003/55 …; Member States which have been granted derogations under Article 28 of Directive 2003/55/… may apply to the Commission for a temporary derogation from the application of this Regulation, for a period of up to two years from the date at which the derogation referred to in this point expires;
(b) interconnectors between Member States and significant increases of capacity in existing infrastructures and modifications of such infrastructures which enable the development of new sources of gas supply as referred to in Article 22(1) and (2) of Directive 2003/55 … which are exempted from the provisions of Articles 18, 19, 20 and 25(2), (3) and (4) of that Directive as long as they are exempted from the provisions referred to in this subparagraph; or
(c) natural gas transmission systems which have been granted derogations under Article 27 of Directive 2003/55 …’.
B – National law
17. In Belgian law, the rules relating to the transportation of natural gas are based on the Law of 12 April 1965 on the transportation of gas and other products by pipeline (‘the Gas Law’). That law was amended, in particular, by the Law of 1 June 2005 transposing Directive 2003/55 into Belgian law (‘the 2005 Gas Law’) and by subsequent laws. (8)
1. The 2005 Gas Law
18. Article 1(7) and (7a) of the Gas Law, in the version of it resulting from the 2005 Gas Law, contains the following definitions:
– ‘ gas transmission ’[in French: transport de gaz] the transmission [in French: transport] of gas by means of transmission facilities for the purpose of supply to customers, but not including supply;
– ‘transit’: the activity consisting in transporting natural gas without distributing or supplying it in Belgian territory.
19. Chapter IVb of the 2005 Gas Law, entitled ‘Access to the natural gas transmission network and to the natural gas and LNG storage facilities’, deals with access to the natural gas transmission network. It governs matters relating to the tariffs for access to the natural gas transmission network and the principles applicable to the setting of the tariffs for the various services concerned.
20. Article 15/5 of the 2005 Gas Law provides:
‘Customers and supply permit holders may access any natural gas transmission network, natural gas storage facility network and LNG facility network on the basis of tariffs established in accordance with Article 15/5a and approved by [CREG]’. (9)
21. Article 15/5a(1) and (2) of the 2005 Gas Law provides:
‘1. The natural gas transmission system operator, the natural gas storage facility operator and the LNG facility operator shall individually determine the total revenue necessary for fulfilling their respective statutory and regulatory obligations in order to establish the tariffs for natural gas transmission, natural gas storage and the use of LNG facilities. That total revenue shall be subject to approval by [CREG].
2. The respective revenues referred to in paragraph 1 shall cover individually for the four-year regulatory period:
(a) all the actual costs necessary for carrying out the tasks referred to in Article 15/1(1) and Article 15/2 by any natural gas transmission system operator, natural gas storage facility operator and LNG facility operator;
(b) an equitable profit margin and depreciation margin, both necessary to ensure for the operator optimum functioning, necessary future investment and the viability of the natural gas transmission system or the natural gas storage facility and/or the LNG facility, and to offer the operator concerned, after European standardisation on the basis of comparable operators, favourable prospects of access to long-term capital markets;
(c) if appropriate, the fulfilment of public service obligations in accordance with Article 15/11;
(d) if appropriate, the surcharges statutorily applied to the tariffs;
(e) if appropriate, the costs and remuneration connected with fulfilment of the obligations referred to in Article 15/1(1)(1)(1) and (2).
...’.
22. Article 15/5b of the 2005 Gas Law provides:
‘Without prejudice to Article 15/5c(2)(2), the tariffs referred to in Articles 15/5 and 15/5a shall comply with the following guidelines:
1. they shall be non‑discriminatory and transparent;
2. they shall cover the revenue as stated in Article 15/5a(2);
3. they shall enable the balanced development of the natural gas transmission system, the natural gas storage facility and/or the LNG facility on Belgian territory, so as to ensure non‑discriminatory treatment for all end-users;
4. they shall be comparable at international level with the best tariff practices applied by operators of natural gas transmission systems, the natural gas storage facility and/or the LNG facility, comparable in similar circumstances;
5. they shall seek to optimise use of the capacity of the natural gas transmission system, the natural gas storage facility and/or the LNG facility;
6. they shall be sufficiently broken down, inter alia:
(a) according to the conditions and rules for use of the natural gas transmission system, the natural gas storage facility and the LNG facility;
(b) in respect of ancillary services;
(c) in respect of any surcharges for public service obligations;
7. the tariff structures shall take into consideration the capacity reserved and necessary for the transmission of natural gas and the operation of the natural gas storage facility and the LNG facility.
8. the tariff structures shall be uniform throughout the territory, without differentiation according to geographical area’.
23. Article 15/5c of the 2005 Gas Law, which regulates the tariff process, states:
‘1. The natural gas transmission system operator, the natural gas storage facility operator and the LNG facility operator shall individually submit to [CREG] an application for approval of their respective tariffs and the tariffs relating to ancillary services. They shall individually publish the approved tariffs for the activities concerned in accordance with the guidelines contained in this chapter.
2. The total revenue shall be fixed for a four-year period and the tariffs shall relate to an identical period. That four-year regulatory period shall begin when the tariffs take effect.
The total revenue shall be broken down on a unitary basis in order to obtain the tariffs. Those tariffs must reflect the cash flow which the system operator needs each year to fulfil his obligations under this law.
3. Without prejudice to the assessment and supervision powers of [CREG], the total revenue for the first year of the regulatory period shall serve as the benchmark for assessing total revenue for the subsequent years in the four-year regulatory period, taking account of the following rules on changes: …
4. Operators shall present to [CREG], for approval, a revenue and tariff proposal based on the total revenue referred to in Article 15/5a.
…’.
24. Article 15/5d of the 2005 Gas Law provides:
‘A natural gas transmission system operator who pursues a transit activity shall submit a transit-specific application for approval to [CREG] in accordance with this chapter with the exception of Articles 15/5b(2), (4), (5) and (8) and 15/5c(3) and without prejudice to Article 15/19’.
25. Under Article 15/19 of the 2005 Gas Law, contracts concluded before 1 July 2004 in accordance with Article 3(1) of Directive 91/296 are to remain valid and continue to be implemented in accordance with that directive.
2. The 2009 Gas Law
26. By the Law of 10 March 2009, which came into force on 10 April 2009, the Belgian legislature amended Article 15/5d and Article 15/19 of the Gas Law.
27. Article 15/5d of the Gas Law, as amended by the Law of 10 March 2009 (‘the 2009 Gas Law’), states:
‘1. Without prejudice to the application of Article 15/19, the provisions of this chapter and the Royal Decree of 8 June 2007 concerning the methodology for determining total revenue including the equitable margin, the general tariff structure, the basic principles governing tariffs, procedures, the publication of tariffs, annual reports, accounts, cost control, variances in the revenues of system operators and the objective index-linking formula, referred to in the Law of 12 April 1965 concerning the transportation of gas and other products by pipeline, in the version published in the Moniteur Belge
of 29 June 2007, are applicable to the tariffs for the transit of natural gas and to natural gas transmission system operators who carry on a transit activity, subject to the following derogations:
1. the tariffs shall be applicable for the periods fixed contractually between the transmission system operator and the system users;
2. in order to guarantee the stability of future prices, the regulatory period referred to in Article 15/5a(2) may exceed four years;
3. the equitable margin for transit shall be determined in accordance with Articles 4 to 8 of the aforementioned Royal Decree of 8 June 2007, it being understood that:
(a) the initial value of the regulated transit activity as at 31 December 2007 is approved by [CREG] on a proposal from the operator, taking into account all the transmission facilities situated in Belgium and used for transit;
(b) the product of the beta coefficient and the risk premium, as a component of the rate of return R mentioned in Article 6 of the aforementioned Royal Decree is fixed at 7%;
In the circumstances referred to in Article 15/5(1)(2), the King may, by decree in consultation with the Council of Ministers, extend the regulatory period on the basis of a substantial revision of the system operator’s investment plan. The duration of that period and any revision of it shall be proposed by the natural gas transmission system operator and subject to the approval of [CREG] before the beginning of each regulatory period.
The transit tariffs which [CREG] determines in accordance with the foregoing principles and at the end of the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007 shall constitute the costs-based tariffs.
2. The natural gas transmission system operator shall provide access, for transit, to the existing transmission facilities on the basis of the tariffs determined in accordance with paragraph 1 and in accordance with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007.
The natural gas transmission system operator shall provide access, for transit, to the facilities to be set up, either on the basis of tariffs determined in accordance with paragraph 1 and with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007 or on the basis of tariffs fixed using market-based transparent and non‑discriminatory methods, such as market-testing, provided that such market-based methods, including the revenue and the tariffs stemming from them, have previously been approved by [CREG].
If the application of the market-based methods gives tariffs which are higher than those established in accordance with paragraph 1 and in accordance with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007, the former tariffs shall apply and they shall be published by the operator in accordance with Article 20(3) of the aforementioned Royal Decree of 8 June 2007. If not, or if any market-based method has not been implemented, the tariffs established in accordance with paragraph 1 and in accordance with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007 shall be applicable.
A positive difference between the revenue resulting from the close of the market‑testing exercise, on the one hand, and the approved costs including the equitable margin resulting from the tariffs established in accordance with paragraph 1 and in accordance with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007, on the other hand, shall be allocated, following approval from the [CREG], by royal decree after consultation with the Council of Ministers:
(a) to the tariffs for use of the transmission system;
(b) to a reserve designed to finance the facilities to be set up within a period approved by [CREG] on a proposal from the operator; otherwise, that amount shall be allocated to the tariffs for the use of the transmission system.
The balance shall be allocated at the discretion of the operator’s shareholders.
The tariffs for use of the transmission system shall first take into account the estimated allocation of that positive difference. The difference between the positive difference budgeted for and the actual difference shall be corrected subsequently.
3. If the contractually agreed period exceeds the duration of the regulatory period, Article 15/5h(2) shall still be applicable.
4. The transit tariffs, whether they are tariffs established in accordance with paragraph 1 and with the procedure laid down in Articles 16 to 19 of the aforementioned Royal Decree of 8 June 2007, or tariffs resulting from the application of Article 15/5a(3) or from the application of market-based methods, shall apply throughout the territory and take into account the distance travelled’.
28. Article 15/19 of the 2009 Gas Law provides that contracts concluded before 1 July 2004 in accordance with Article 3(1) of Directive 91/296 ... are to remain valid and continue to be implemented in accordance with the provisions of that directive.
Paragraph 1 is interpreted as meaning that it applies to contracts concerning the transit of natural gas concluded before 1 July 2004 between:
1. on the one hand, Fluxys, a public limited company, Distrigaz, a public limited company, or a subsidiary of either of those companies, which specialised in the marketing of transit capacity and the performance of related transport services; and
2. on the other hand, charterers having the status either of entities responsible for a large high pressure natural gas grid or of an entity responsible for importing and exporting natural gas within the meaning of Article 3[(1)] of Directive 91/296 ... .
29. Following the adoption of the Law of 10 March 2009, CREG brought an action for the annulment of that Law and the Commission initiated infringement proceedings against the Kingdom of Belgium by sending a letter of formal notice to the Belgian Government on 9 October 2009. By the Law of 29 April 2010, which came into force on 31 May 2010 (‘the 2010 Gas Law’), Article 15/5d of the 2009 Gas Law was repealed ex nunc . That same law provides that Article 15/19(1) of the 2009 Gas Law is to cease to have effect on 2 March 2011 (10) and that Article 15/19(2) of the 2009 Gas Law is repealed ex nunc . By judgment of 8 July 2010, the Belgian Constitutional Court annulled the 2009 Gas Law with effect ex tunc.
III – The dispute in the main proceedings
30. Fluxys SA (‘Fluxys’) is the company which operates the gas transmission network in Belgium. (11)
31. CREG is the Belgian regulatory authority responsible in particular for approving tariffs for regulated activities on the natural gas transmission network.
32. Under the 2005 Gas Law, Fluxys was obliged to submit two separate tariff proposals, one relating to transit activities and the other relating to ‘conveyance’ and storage. In 2007, Fluxys therefore submitted for approval by CREG two separate proposals for the period from 2008 to 2011. Those proposals were based on two different methodologies. CREG did not accept those two proposals because it considered that Fluxys had not correctly allocated the operating costs to its various activities. In the course of the two administrative procedures concerning Fluxys’s two proposals, CREG itself fixed provisional tariffs, reallocating part of the operating costs that Fluxys had allocated to its transmission activities to Fluxys’s transit activities. Fluxys challenged those decisions by CREG.
33. Following the applications for annulment and provisional suspension of CREG’s decision concerning the provisional tariffs for transit activities,
the referring court suspended that decision. It considered that, in the light of Community law, the aforementioned decision by CREG was prima facie
illegal. The referring court’s reasoning was that the Community rules preclude the application of national provisions which apply separate regimes for ‘conveyance’ activities and transit activities respectively. The referring court concluded that CREG should have required Fluxys to make a tariff proposal relating to the entirety of its transportation system, without distinguishing between its ‘conveyance’ activities and its transit activities. In the course of that procedure, the national court did not make a reference to the Court for a preliminary ruling.
34. Following the applications for annulment and provisional suspension of CREG’s decision concerning the provisional tariffs for ‘conveyance’ and storage activities, the referring court suspended that decision for the same reasons. In the course of that procedure, the national court decided to refer a question to the Court for a preliminary ruling.
IV – The question referred and the procedure before the Court
35. The referring court doubts whether the Gas Law is compatible with the Community rules in so far as it provides for two separate tariff regimes for transit activities and ‘conveyance’ and storage activities respectively. In the event that that Law is incompatible with the Community rules, the referring court considers that CREG should have set aside the provisions of the Gas Law which are contrary to those rules and rejected the separate tariff proposals submitted by Fluxys, inasmuch as the latter were based on different tariff methodologies for transmission and transit activities. On account of its doubts as to the compatibility of the Gas Law with Regulation No 1775/2005 and Directive 2003/55, and the arguments put forward by CREG and Fluxys in this regard, the referring court decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
Do Articles 1, 2 and 18 of Directive 2003/55/EC and Article 3 of Regulation No 1775/2005/EC preclude national legislation establishing a separate tariff regime for the transit activity, which derogates from the rules governing transportation, by creating a distinction, within the transportation activity, between ‘conveyance’ and ‘transit’?
36. By order of 21 September 2009, the President of the Court rejected the request by the referring court for application of the accelerated procedure.
37. Fluxys, CREG, the Belgian Government, the United Kingdom Government and the Commission submitted written observations within the period prescribed by Article 23 of the Statute of the Court of Justice.
38. By letter of 7 April 2010, Fluxys informed the Court that an agreement had been concluded between Fluxys and CREG on the application of a future tariff regime which was no longer based on a distinction between ‘conveyance’ and transit but which, on the basis of the same methodology, reflected the costs of the services provided for each activity. Moreover, Fluxys notified the Court that it had withdrawn almost all the pleas raised before the referring court against CREG’s decisions, including those relating to the distinction between ‘conveyance’ and transit activities, the only plea maintained by Fluxys being that alleging infringement of Article 15/19 of the Gas Law transposing Article 32(1) of Directive 2003/55, relating to ‘historical’ contracts. In the light of those circumstances, the Court asked the referring court, by letter of 28 April 2010, whether it intended to maintain its request for a preliminary ruling. By letter of 12 May 2010, the referring court replied that the agreement between CREG and Fluxys and the partial withdrawal of its action by Fluxys did not render the question referred for a preliminary ruling irrelevant and that it intended to maintain it.
39. By fax of 28 May 2010, the Belgian Government informed the Court of the entry into force of the 2010 Gas Law, by which Articles 15/5d and 15/19(2) of the Gas Law had been repealed and which provided that Article 15/19(1) of the Gas Law would cease to have effect on 2 March 2011.
40. A hearing was held on 17 June 2010, in the presence of representatives for CREG, the Belgian and Czech Governments and the Commission.
41. By letter of 16 July 2010, Fluxys drew the Court’s attention to a judgment of the Belgian Constitutional Court of 8 July 2010 by which the latter had annulled the 2009 Gas Law with effect ex tunc . The Court asked the referring court to indicate the inferences which it draws from that judgment. By letter of 8 September 2010, the referring court replied that, following the annulment ex tunc of the 2009 Gas Law, the provisions of the previous Gas Law are applicable to the dispute in the main proceedings. Although the distinction between transit and ‘conveyance’ of gas which led to the annulment of the 2009 Gas Law already existed in that previous law and the findings of the Belgian Constitutional Court therefore also apply to that previous law, the referring court stated that it is none the less still bound by the provisions of that previous law, since the latter have not been referred to the Belgian Constitutional Court.
V – Summary of the observations presented to the Court
42. Fluxys
and the Belgian and Czech Governments
maintain that neither Articles 1, 2 and 18 of Directive 2003/55 nor Article 3 of Regulation No 1775/2005 preclude a national regime which, within the context of activities connected with the transportation of natural gas, distinguishes between ‘conveyance’ activities and transit activities, and which applies a different tariff regime to those activities, provided that that differentiation reflects objective differences between those two types of activity, such as actual costs.
43. ‘Conveyance’ and transit activities are not identical but take place on different markets. For that reason, they entail different costs and different forms of investment. In principle, ‘conveyance’ activities depend only on demand forecasts for an essentially captive and stable market. They are also subject to public service obligations. Transit activities, on the other hand, take place on a competitive international market and therefore depend on demand trends which are difficult to predict in the long term. Unlike ‘conveyance’ activities, which are always based on long-term contracts and on some certainty over tariffs, transit activities are exposed to the risk that users might stop using a route at any time or that a combination of circumstances might compromise the profitability of an investment which could not be reused for other purposes. The specific characteristics of transit are thus reflected in a very high level of uncertainty and hence a risk of over‑investment and stranded costs. The Czech Government considers that system operators must take account of the fact that transit activities require exactly the same technical capacity at all entry and exit points of the system in question.
44. Fluxys and the Belgian and Czech Governments argue that the separate regimes established by the Gas Law take account of the specific characteristics of each activity. To impose the same treatment on different situations would be contrary to the principle of non‑discrimination. Directive 2003/55 does not require that ‘conveyance’ and transit be treated in a uniform manner. Member States retain the possibility of treating different situations differently and are relatively free to lay down different regimes. That differentiation may come at the level of the approval decision taken by the regulatory authority or at the statutory level. In the latter event, it is sufficient if each of the separate regimes established by law complies with the requirements of Regulation No 1775/2005 and Directive 2003/55. Tariffs must therefore be approved and published in advance, and applied without discrimination. The provisions of the Gas Law do not lead to discriminatory treatment, as all system users are able to subscribe to the same service at the same time on the same terms.
45. The Belgian Government maintains that the repeal by the 2010 Gas Law of the derogatory regime for transit was motivated solely by the objective of ensuring legal certainty in Belgium in relation to transit.
46. CREG
considers that, in the present preliminary ruling proceedings, it is necessary first to examine the validity of Article 32(1) of Directive 2003/55, which states that the provisions of that directive do not apply to ‘historical’ contracts. The effect of applying that exception to the dispute in the main proceedings would be to remove more than 85% of Fluxys’s transit activities from the scope of Directive 2003/55. However, by adopting Regulation No 1775/2005, the Community legislature implicitly repealed that exception for ‘historical’ contracts. If the Community legislature did not repeal the exception for ‘historical’ contracts, CREG raises the question whether that exception is in conformity with the provisions of the EC Treaty and the general principles of law, in particular the principle of non‑discrimination.
47. CREG considers that the principle of non‑discrimination, established in particular in Article 3 of Regulation No 1775/2005 and in Articles 1, 2 and 18 of Directive 2003/55, precludes a national law from creating, within the context of transportation activities, a distinction between ‘conveyance’ and transit by establishing a tariff regime specific to transit activities. The Community rules do not draw any distinction between ‘conveyance’ and transit activities. They do not authorise any differentiated treatment. CREG refers to the Community legislature’s intention, expressed in recital 31 in the preamble to Directive 2003/55, to set up homogenous, non‑discriminatory regimes for access to transmission networks, including cross‑border flows between Member States. A unitary charging regime makes it possible to ensure that such access is transparent and non‑discriminatory and promotes the development and stability of the network. It is part and parcel of the development and harmonisation of transportation in the European network.
48. The United Kingdom Government and the Commission
propose that the Court’s answer should be that the principle of non‑discrimination, set out in Article 3(1) of Regulation No 1775/2005 and Articles 18(1) and 25(4) of Directive 2003/55, precludes national legislation from creating a tariff regime specific to transit activities which derogates from the rules governing transportation activities by creating, within the context of transportation activities, a distinction between ‘conveyance’ and transit.
49. ‘Conveyance’ and transmission are comparable activities. Regulation No 1775/2005 and Directive 2003/55 define transmission
as the activity of transporting gas through a high pressure pipeline network, irrespective of its subsequent destination. Those measures therefore make no distinction between ‘conveyance’ activities and transit activities. On the contrary, that directive, as is clear from recital 31 in its preamble, repealed Directive 91/296 in so far as it contained a separate definition of transit.
50. Consequently, the Community legislation precludes special tariff regimes relating to transit activities such as that established by Belgian legislation. The Commission points out that the regime introduced by the 2009 Gas Law lays down separate rules for transit activities in relation to the period of application of the approved tariffs, the determination of the equitable margin and the tariff conditions governing access to the transmission system. All those rules are at odds with Directive 2003/55 and Regulation No 1775/2005.
51. According to the United Kingdom Government and the Commission, Community law does not preclude tariffs from reflecting the costs and risks of a transportation activity and, therefore, from being different. However, national legislation such as the Gas Law presents a problem because it establishes an entirely different tariff structure based on the general and systematic distinction between ‘conveyance’ and transit, and therefore on the subsequent destination of the natural gas. The Gas law contains no provision which reflects in detail, on a case-by-case basis, the fact that account is taken of the costs and risks of transit activities, and nothing to justify why a different regime should be applicable to all transit activities. There is no systematic reason why the costs of taking gas from the network at a point where it connects with a distribution network or a major consumer should be lower than the costs of taking it from an interconnection between grids. Moreover, there is nothing to support the view that agreements involving the taking of gas from an interconnection between grids are inherently more exposed to risk than any other type of transportation.
52. Finally, the Commission takes the view that the exception applicable to ‘historical’ contracts referred to in Article 32(1) of Directive 2003/55 was not repealed by Regulation No 1775/2005.
VI – Admissibility of the question referred
53. During the procedure, the Court was informed of various events concerning the dispute in the main proceedings and the validity of the 2009 Gas Law. I shall first analyse the repercussions which those events may have on the admissibility of the question referred.
54. First, Fluxys withdrew its pleas relating to the distinction between transit and ‘conveyance’ before the national court. The question therefore arises whether that withdrawal rendered the reference for a preliminary ruling inadmissible. In this regard, it should be recalled that a question referred for a preliminary ruling is inadmissible if it is not manifestly relevant to the resolution of the dispute in the main proceedings. (12) The referring court has stated that, under the national rules of procedure, Fluxys may not unilaterally withdraw its pleas and the question referred for a preliminary ruling therefore remains relevant. In a preliminary ruling procedure, the national courts alone have jurisdiction to interpret and apply national law. In principle, it is not for the Court to review the national court’s interpretation of national provisions. (13) It follows that Fluxys’s withdrawal of its pleas does not call in question the admissibility of the reference for a preliminary ruling.
55. The second event is the repeal ex nunc of the separate regime for transit activities by the 2010 Gas Law. That repeal does not call in question the relevance of the reference for a preliminary ruling, at least not in its entirety, since the repeal is effective only prospectively.
56. The third event is the annulment of the 2009 Gas Law with effect ex tunc
by the judgment of the Belgian Constitutional Court of 8 July 2010. In its letter of 8 September 2010, the national court stated that, despite the annulment of that Law, it intended to maintain its reference for a preliminary ruling. In its view, the Gas Law applicable to the dispute in the main proceedings following the annulment of the 2009 Gas Law also raises the question of the compatibility with the Community rules of national legislation which makes a distinction between transit activities and ‘conveyance’ activities.
57. First, it must be noted that the national court has not referred to the content of that earlier Gas Law either in its reference for a preliminary ruling or in its letter of 8 September 2010. According to the case-law of the Court, it is essential that the national court should make explicit, in the order for reference itself, the factual and legislative context of the dispute in the main proceedings and provide at the very least some explanation of the reasons for the choice of the provisions of Community law which it requires to be interpreted and the link it establishes between those provisions and the national legislation applicable to the dispute before it. (14) In that connection, it is important to point out that the information contained in the orders for reference serves not only to enable the Court to provide useful answers but also to enable the governments of the Member States and other interested parties to submit observations. It is therefore the Court’s duty to ensure that the opportunity to submit observations is safeguarded, bearing in mind that only the orders for reference are notified to the interested parties.(15) In accordance with that case-law, a reference for a preliminary ruling may be rejected as inadmissible if it does not indicate the provisions of national law applicable to the dispute in the main proceedings.
58. However, in the light of the circumstances of this case, it would in my view be excessively strict to reject the order for reference in accordance with that case‑law. The systematic distinction between transit and ‘conveyance’ lies at the heart of the question referred for a preliminary ruling and was therefore addressed and discussed by the interested parties during the proceedings before the Court. In its letter of 8 September 2010, the national court stated that that distinction already existed in the law which preceded the 2009 Gas Law. Consequently, the annulment of the 2009 Gas Law does not really change the scope of the debate. Moreover, the provisions of the law preceding the 2009 Gas Law, that is to say the 2005 Gas Law, are apparent from the observations submitted by Fluxys and CREG. Those parties submit that, irrespective of the annulment ex tunc of the 2009 Gas Law, the provisions of the 2005 Gas Law were applicable to the dispute in the main proceedings ratione temporis,
not the provisions of the 2009 Gas Law. In those circumstances, it seems to me that the fact that the referring court does not provide precise information on the provisions of the law which preceded the annulled 2009 Gas Law does not inevitably mean that the order for reference must be rejected as inadmissible.
59. The annulment of the 2009 Gas Law raises an additional question concerning the admissibility of the order for reference. In this case, the referring court seems to be able to rule on the dispute in the main proceedings by recourse to the Belgian Constitutional Court and not the Court of Justice. As the referring court states in its letter of 8 September 2010, the findings of the Belgian Constitutional Court on the basis of which the 2009 Gas Law was annulled also appear to be applicable to the systematic distinction between ‘conveyance’ activities and transit activities provided for in the 2005 Gas Law. While the national court maintains that it is obliged to apply the provisions of the 2005 Gas Law since they have not formed the subject of a reference to the Constitutional Court, it does not explain why it did not itself refer the matter to the Constitutional Court by submitting a question for a preliminary ruling, despite the manifest doubts as to the constitutionality of the 2005 Gas Law.
60. However, even though the national court could have referred the matter to the Belgian Constitutional Court by submitting a question for a preliminary ruling, this would not render its reference to the Court of Justice for a preliminary ruling inadmissible. The system of cooperation between the national courts and the Court of Justice, as provided for in Article 234 EC, is not a subsidiary procedure and does not therefore depend on the exhaustion of the procedures provided for by national law. (16) It is sufficient that the question referred to the Court is relevant. In any event, the fact is that the Belgian Constitutional Court based its judgment in part on an interpretation of Article 3(1) of Regulation No 1775/2005 and Directive 2003/55. If, despite the judgment of the Constitutional Court, the referring court still has doubts as to the interpretation of those provisions of Community law, Article 234 EC enables it to refer the question to the Court of Justice.
61. The question referred for a preliminary ruling is therefore admissible.
VII – Legal assessment
A – Preliminary remarks
62. One of the objectives of the European energy policy in the sphere of natural gas is to offer European citizens the benefits of an efficient and open market by eliminating barriers to trade between Member States in that sector. (17) The market in natural gas has some specific characteristics which distinguish it from other sectors. One of those specific characteristics is that gas is transported by high pressure pipelines and that the operators of those pipelines regularly have a monopoly on the transportation of gas within a given territory. (18)
63. In order to improve the efficiency of the internal market in gas, the Community legislature first adopted Directive 91/296 on the transit of natural gas through grids, then Directive 98/30 concerning common rules for the internal market in natural gas. Next, the legislature adopted Directive 2003/55, which seeks to ensure a level playing field and to reduce the risks of market dominance and predatory behaviour. (19) Article 18 of the latter directive establishes a system of third party access to the transmission system, which is based on published tariffs and which must be applied objectively and without discrimination between system users. By Regulation No 1775/2005, the Community legislature adopted common provisions on conditions for access to the natural gas transmission networks which are directly applicable in all Member States.
64. The question referred for a preliminary ruling concerns the principle of non‑discriminatory access and, hence, an essential element of the system for access to transmission networks on the basis of regulated tariffs. The referring court seeks to ascertain whether the principle of non‑discriminatory access to transmission networks, established in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55, precludes a national law such as the Gas Law applicable to the dispute in the main action which creates a distinction, within the context of the activity of gas transportation, between ‘conveyance’ (i.e. the transportation of natural gas to a final destination in Belgium) and transit (i.e. the cross‑border transportation of natural gas) and applies two separate tariff regimes to those two transportation activities.
65. However, having regard to the points in dispute in the main proceedings, that question [cannot] be interpreted as relating only to the inferences which must be drawn from that principle but also concerns the applicability of that principle. One of the points in dispute in the main proceedings is the validity of the exception applicable to ‘historical’ contracts, established in Article 32(1) of Directive 2003/55. Even though the order for reference does not expressly mention that provision, the fact remains that the latter removes certain contracts from the provisions of Directive 2003/55. The principle of non‑discriminatory access set out in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55 may preclude a national law only if those provisions are applicable to the contracts in question. Moreover, the referring court stated in its letter of 12 May 2010 that the question concerning the applicability of the principle of non‑discriminatory access is relevant in the context of the main proceedings and asked the Court to examine it.
66. I therefore consider it appropriate to start by addressing the question of the validity of the exception relating to ‘historical’ contracts provided for in Article 32(1) of Directive 2003/55 (section B) before analysing whether the principle of non‑discriminatory access set out in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55 precludes a national law which applies two separate tariff regimes for ‘conveyance’ activities and transit activities respectively (section C).
B – The exception relating to ‘historical’ contracts
67. In accordance with Article 32(1) of Directive 2003/55, Directive 91/296, that is to say the ‘transit’ directive, was repealed with effect from 1 July 2004. That date coincides with the date on which the time-limit for transposing Directive 2003/55 expired. However, Article 32(1) of the latter directive provides for an exception in the case of contracts which:
– relate to transit within the meaning of Article 2 of Directive 91/296;
– were concluded before 1 July 2004; and
– comply with Article 3(1) of the transit directive. (20)
Such ‘historical’ contracts continue to be valid and to be implemented in accordance with the provisions of Directive 91/296. The principle of non‑discrimination set out in Article 18 of Directive 2003/55 does not therefore apply to those contracts.
68. CREG considers that that exception relating to ‘historical’ contracts is not valid.
69. First, CREG takes the view that Regulation No 1775/2005 implicitly repealed Article 32(1) of Directive 2003/55. In that context, CREG submits that that regulation makes no reference to that latter provision, and in particular to Article 16 thereof, which lists the exceptions and derogations. CREG infers from this that, by adopting Regulation No 1775/2005 after adopting Directive 2003/55, the Community legislature implicitly repealed the exception applicable to ‘historical’ contracts. That interpretation, it contends, is confirmed by the preparatory work on Regulation No 1775/2005, which shows that all relevant exceptions and derogations are listed in Article 16 of Regulation No 1775/2005, and by recital 1 in the preamble to that regulation, which states that its aim is to adopt the structural changes necessary to remove the remaining barriers to the completion of the internal market in gas.
70. I am unconvinced by that interpretation.
71. It is true that Regulation No 1775/2005 does not contain any reference to the exception relating to ‘historical’ contracts. However, the fact remains that that regulation likewise contains no provision concerning the repeal of Directive 91/296. In my opinion, this indicates that Regulation No 1775/2005 does not deal with the question of the extent to which Directive 91/296 was repealed or the extent to which it remained in force, and that that question was settled only by Directive 2003/55. The absence of any reference to the exception relating to ‘historical’ contracts in Regulation No 1775/2005 cannot therefore be interpreted as an implicit repeal of that exception.
72. That analysis is borne out by the fact that none of the recitals in the preamble to Regulation No 1775/2005 reflects the Community legislature’s intention to repeal that exception. Nor is any such intention apparent in the preparatory work for that regulation. In the light of the considerable economic consequences that might follow from the repeal of such an exception and the very close relationship between Directive 2003/55 and Regulation No 1775/2005, the lack of any clear indication by the legislature seems to my mind to militate against an interpretation to the effect that that exception was implicitly repealed.
73. Secondly, CREG submits that the exception relating to ‘historical’ contracts provided for in Article 32(1) of Directive 2003/55 is not consistent with primary law, in particular the principle of non‑discrimination.
74. The arguments put forward in this regard by CREG are likewise unconvincing. The fact that Article 32(1) of Directive 2003/55 distinguishes between charterers which hold a ‘historical’ contract and those which do not does not constitute discrimination since that distinction is justified by respect for the legitimate expectations of charterers which do hold ‘historical’ contracts.
75. It must be concluded that the exception relating to ‘historical’ contracts provided for in Article 32(1) of Directive 2003/55 is valid and must therefore be taken into account in the application not only of Directive 2003/55 but also of Regulation No 1775/2005. In so far as the conditions for classification as ‘historical contracts’ are fulfilled, (21) Fluxys’s contracts are not therefore subject to the principle of non‑discriminatory access set out in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55.
C – The principle of non‑discriminatory access
76. The referring court seeks to ascertain whether the principle of non‑discriminatory access set out in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55 precludes national legislation such as the 2005 Gas Law applicable to the dispute in the main proceedings which makes a general distinction, within the context of the activity of gas transportation, between ‘conveyance’ activities, on the one hand, and transit activities, on the other, and applies two separate tariff regimes to those two types of activity.
77. The principle of non‑discrimination requires that comparable situations must not be treated differently and that different situations must not be treated alike unless differentiation is objectively justified. (22) I have little doubt that ‘conveyance’ activities and transit activities must be regarded as two comparable situations (section 1). However, the 2005 Gas Law applicable to the dispute in the main proceedings treats those two situations differently (section 2). It is therefore necessary to analyse the extent to which the application of two separate regimes for ‘conveyance’ activities and transit activities respectively is objectively justified (section 3).
1. Comparable situations
78. The comparability of two situations must be assessed in particular in the light of the subject-matter and purpose of the legislative act at issue. (23) It is therefore appropriate to examine the relevant provisions of Regulation No 1775/2005 and of Directive 2003/55.
79. According to Article 1(1) of Directive 2003/55 and Regulation No 1775/2005 respectively, those two acts apply to the transmission of gas. In accordance with Article 2(3) of Directive 2003/55 and Article 2 of Regulation No 1775/2005, ‘transmission’ means the transport of natural gas through a high pressure pipeline network other than an upstream pipeline network with a view to its delivery to customers, but not including supply. The definition of transmission therefore makes no distinction between internal and cross‑border gas flows. Pursuant to the principle ubi lex non distinguit, nec nos distinguere debemus, this militates in favour of the comparability of ‘conveyance’ and transit activities.
80. That interpretation is confirmed by Article 32(1) of Directive 2003/55 and recital 31 in the preamble to the latter directive. Article 32(1) repeals Directive 91/296, which laid down specific rules for transit. Recital 31 in the preamble to Directive 2003/55 shows that one of the objectives pursued in repealing Directive 91/296 was to establish homogenous and non‑discriminatory rules of access for all transportation activities, including transit.
81. In the light of the subject-matter and purpose of Regulation No 1775/2005 and Directive 2003/55, ‘conveyance’ and transit activities must therefore be regarded as comparable situations. Consequently, the principle of non‑discriminatory access requires that these two types of activity connected with the transportation of gas must be treated in the same way unless different treatment is objectively justified.
2. Different treatment
82. In its reference for a preliminary ruling, the national court referred to the provisions of the 2009 Gas Law. However, following the annulment ex tunc
of that Law, the national court now refers to the provisions of the 2005 Gas Law.
83. Article 15/5d of the 2005 Gas Law provides that a natural gas transmission system operator who pursues a transit activity is to submit a transit-specific application for approval to CREG. That application is subject to the same provisions as the corresponding application for ‘conveyance’, with the exception of Articles 15/5b(2),( 4), (5) and (8) and 15/5c(3) of the 2005 Gas Law. Under those exceptions, the tariffs for transit activities:
– need not cover the revenue as stated in Article 15/5a(2); (24)
– need not be comparable at international level with the best tariff practices applied by operators of natural gas transmission systems which are comparable in similar circumstances; (25)
– need not seek to optimise use of the capacity of the natural gas transmission system; (26) and
– need not be uniform throughout the territory, without differentiation according to geographical area. (27)
Moreover, in the case of transit activities, the total revenue for the first year of the regulatory period does not have to be used as the benchmark for assessing total revenue for the subsequent years in the four-year regulatory period.
84. The provisions of the 2005 Gas Law therefore treat ‘conveyance’ activities and transit activities differently.
3. Objective justification
85. In the presence of two comparable types of activity connected with the transportation of gas, such as ‘conveyance’ and transit, (28) the principle of non‑discriminatory access to gas networks requires that there should be no difference in the tariffs applicable to those two transportation activities, unless differentiation is objectively justified. That principle does not require the application of a uniform tariff. A difference in treatment may be justified if it is based on an objective and reasonable criterion, that is, if the difference relates to a legally permitted aim pursued by the legislation in question and is proportionate to the aim pursued by the treatment concerned. (29)
86. It is therefore necessary, first of all, to determine the relevant criteria which are capable of justifying the differentiated treatment of those two activities connected with the transportation of gas [section (a)] before examining next whether the general and systematic distinction between ‘conveyance’ activities and transit activities drawn by the Gas Law, may be justified in the light of those criteria [section (b)]. In so far as such a distinction does not exactly reflect differences concerning relevant criteria between ‘conveyance’ activities as a whole and transit activities as a whole, but nevertheless reflects a general trend, the question arises whether such a generalisation may be justified [section (c)].
a) Relevant criteria capable of justifying a differentiation of tariffs
87. An examination of the provisions of Regulation No 1775/2005 and Directive 2003/55 shows that the objective criteria capable of justifying a differentiation of tariffs include:
– the actual costs incurred by the transportation activity; (30)
– the investments necessary to the integrity and improvement of the system; (31)
– the risks to which investments in a particular activity are subject;(32)
– the competition to which a particular activity is exposed; (33) and
– public service obligations. (34)
Regulation No 1775/2005 and Directive 2003/55 also point out that it is important to avoid cross‑subsidies between different activities connected with the transportation of gas. (35)
88. On the other hand, the fact that the gas being transported is intended for consumption in Belgian territory or for transmission to another Member State is not a criterion which in itself provides justification for affording different treatment to two comparable activities connected with the transportation of gas. (36)
b) Justification for a general and systematic distinction such as the distinction between ‘conveyance’ activities and transit activities
89. A national law such as the 2005 Gas Law, which draws a general and systematic distinction between ‘conveyance’ activities and transit activities, raises an obvious issue in relation to the principle of non‑discriminatory access to networks. Such a law distinguishes according to whether the gas being transported is intended for consumption in Belgian territory or for transmission to the territory of another Member State. That is not a relevant criterion capable of justifying different treatment.
90. None the less, such a distinction may be consistent with the principle of non‑discrimination if in fact it reflects differences between those two types of activity which concern relevant criteria. Although it is clear from Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55 that a difference in treatment as between ‘conveyance’ and transit must be justified, those provisions do not provide for positive discrimination between those two types of activity. They do not therefore preclude a ‘conveyance’ activity and a transit activity from being the subject of different treatment if there are between those two activities differences relating to relevant criteria.
i) The Belgian Government’s approach
91. The Belgian Government considers that a distinction between ‘conveyance’ activities and transit activities is justified. It submits that it is consistent with the principle of non‑discrimination to apply two separate regimes to ‘conveyance’ activities and transit activities respectively, provided that there are relevant differences between those two activities and that the other requirements of Regulation No 1775/2005 and Directive 2003/55 are satisfied. In the view of the Belgian Government, such a system is not discriminatory because all system users are able to subscribe to the same service at the same time and on the same terms within each regime.
92. As I see it, that approach is based on a misinterpretation of the principle of non‑discrimination. Admittedly, that principle does not oblige Member States to justify a difference in the treatment of situations which are not comparable. However, in so far as two situations, such as ‘conveyance’ activities and transit activities, are comparable, each element of a derogatory regime must be justified. It is not therefore sufficient to show that certain transit activities may have characteristics different from those of ‘conveyance’ activities in order to justify the application of two separate tariff regimes. On the contrary, a Member State must justify each element of the derogatory regime which it prescribes for transit activities as compared with the regime reserved for ‘conveyance’ activities. A derogatory regime for transit activities is therefore justified only in so far as
it reflects differences between those two activities which concern relevant characteristics under Regulation No 1775/2005 and Directive 2003/55.
ii)
Objective differences between ‘conveyance’ activities and transit activities
93. Fluxys and the Belgian Government submit that the general distinction between ‘conveyance’ activities and transit activities reflects objective differences between those two types of transportation activity which concern relevant criteria. In that context, they allege in particular that:
– transit activities are exposed to international competition, whereas there is a monopoly on ‘conveyance’ activities;
– demand for transit activities is less stable;
– transit activities are subject to a higher risk of investments being stranded;
– ‘conveyance’ activities may experience significant fluctuation in the short term and the service they provide must therefore typically be flexible; and
– ‘conveyance’ activities are subject to public service obligations.
94. CREG, the United Kingdom Government and the Commission question whether all the transit activities carried on by Fluxys exhibit those specific characteristics. They consider that the characteristics may vary from one transit route to another.
95. With regard to the differences referred to by Fluxys and by the Belgian Government, it must be pointed out first of all that those differences concern relevant criteria such as those mentioned in point 87 of this Opinion. Differences concerning those criteria are therefore capable of justifying the application of differentiated treatment.
96. The fact is, however, that provisions of a national law such as those of the 2005 Gas Law draw a general and systematic distinction
between all ‘conveyance’ activities, on the one hand, and all transit activities, on the other. Such a distinction is justifiable only if the differences referred to are present for all transit activities. Fluxys and the Belgian Government justify the derogatory provisions applicable to all transit activities by claiming in particular that these activities are exposed to international competition, that demand for transit is less stable and that transit activities are subject to a higher investment risk. In my view, however, it is far from obvious in this case that all transit activities exhibit those characteristics.
97. In a preliminary ruling procedure, the Court does not have jurisdiction to establish the facts itself. It will therefore be for the referring court to examine whether all the transit activities carried on by Fluxys are characterised by the differences referred to by Fluxys and the Belgian Government. However, since that examination must be conducted with due regard for the legislative framework established by Regulation No 1775/2005 and Directive 2003/55, it is appropriate to give the following guidelines.
98. With regard to the submission that transit activities are exposed to international competition, the referring court will have to examine in detail whether all the transit routes in the Fluxys network are exposed to international competition and whether that competition is so intense that it must be taken into account in the tariffs applicable to all transit activities. The mere fact that it is technically possible to build another transit route or to use another operator’s network is not sufficient to support the conclusion that a transit route is subject to appreciable international competition. The route via another operator’s network or the construction of another route must represent an economic alternative to the transit route in Fluxys’s network. The impact of international competition on transit activities may therefore vary from one transit route to another.
99. In so far as Fluxys and the Belgian Government claim that transit activities are subject to a higher investment risk, the referring court will have to examine the probability of that risk. This may vary, in particular, depending on the existence and intensity of international competition and on the amount of the initial investment already recouped. It is therefore possible that that investment risk will vary depending on the transit route.
100. Finally, the referring court will have to analyse whether the instability of demand affects all transit routes in Fluxys’s network and whether it affects them all to the same extent.
101. Without wishing to anticipate the outcome of the examination by the referring court, I consider it quite likely that the court will find that not all transit activities are subject to the constraints claimed by Fluxys and the Belgian Government, or that they are not subject to them to the same extent. In that event, the systematic and general distinction between ‘conveyance’ activities and transit activities could not be entirely justified by differences concerning relevant criteria because it would not reflect objective differences between those two types of activity.
iii)
Power of generalisation
102. In the (likely) event that the general and systematic distinction between all ‘conveyance’ activities and all transit activities, provided for by a national law such as the Gas Law, cannot be entirely justified by differences concerning relevant criteria, the question arises whether that distinction can be justified by reference to a power of generalisation on the part of the Member States.
103. The principle of non‑discriminatory access does not oblige Member States to make provision for tariff regimes which reflect down to the last detail all the specific characteristics which the various transportation activities may exhibit. In the interests of practicability and the transparency of tariffs, Member States may generalise the tariff regime to some extent. They have some discretion over the choice of criteria by which they generalise the tariff regime. (37)
104. Even though the distinction between ‘conveyance’ activities and transit activities does not exactly reflect all the differences between those transportation activities as a whole, it may conceivably reflect a general trend. The question therefore arises whether the general and systematic distinction between ‘conveyance’ and transit might be justified by reference to a power of generalisation on the part of Member States.
105. In my view, the answer to that question must be in the negative. A generalisation based on the distinction between ‘conveyance’ and transit would be at odds with the objectives pursued by Regulation No 1775/2005 and Directive 2003/55. Those acts seek to promote the development of a single European market in natural gas and, therefore, to eliminate the barriers precluding cross‑border flows of gas between Member States. (38) The establishment of regulated and non‑discriminatory access to high pressure gas networks is one of the main instruments for the elimination of barriers to cross‑border flows of natural gas. After all, the principle of non‑discrimination obliges the operators of the various networks to demonstrate why cross‑border gas flows have to be treated differently from internal gas flows. That obligation to justify treating internal gas flows differently from cross‑border flows makes it possible to determine which differences in treatment are not based on relevant criteria and are therefore unfounded. (39)
106. A generalisation of tariff regimes which distinguishes between ‘conveyance’ activities and transit activities may jeopardise the objective of market integration pursued by Regulation No 1775/2005 and Directive 2003/55. (40) It would allow system operators to apply different tariffs even where this is not justified on the basis of relevant criteria. Even if it affected only a limited number of cases, such an approach would run counter to the idea of the progressive integration of national markets.
107. In conclusion, I consider that, while it is true that Member States may generalise their tariff regimes to some extent, Regulation No 1775/2005 and Directive 2003/55 nevertheless preclude generalisation between ‘conveyance’ activities and transit activities.
c) Consequence
108. In so far as a national law such as the 2005 Gas Law draws a general and systematic distinction between ‘conveyance’ activities and transit activities which is not an exact reflection of the differences between ‘conveyance’ activities as a whole and transit activities as a whole, concerning relevant criteria, it is not consistent with the principle of non‑discriminatory access to natural gas networks set out in Article 3 of n° Regulation No 1775/2005 and Article 18 of Directive 2003/55.
D – Summary
109. It is clear from Article 32(1) of Directive 2003/55 that the principle of non‑discriminatory access to gas networks provided for in Article 3(1) of Regulation No 1775/2005 and Article 18 [of Directive 2003/55] is not applicable to ‘historical’ contracts.
110. In so far as the principle of non‑discriminatory access to gas networks set out in Article 3 of Regulation No 1775/2005 and Article 18 of Directive 2003/55 is applicable, it precludes a national law from establishing two separate tariff regimes for natural gas ‘conveyance’ and transit respectively, unless those separate tariff regimes exactly reflect the differences between ‘conveyance’ activities as a whole and transit activities as a whole, and unless those differences concern criteria which are relevant under Regulation No 1775/2005 and Directive 2003/55. The fact that the gas crosses an intra-Community border is not in itself a relevant criterion.
VIII – Conclusion
111. In the light of the foregoing, I propose that the Court’s answer to the question referred for a preliminary ruling by the Cour d’appel de Bruxelles should be as follows:
The principle of non‑discriminatory access to high pressure gas networks, set out in Article 3 of Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks and Article 18 of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC precludes national laws from creating two separate tariff regimes for the internal transmission of gas and the cross‑border transmission of gas respectively, unless the derogatory tariff regime for the cross‑border transmission of gas exactly reflects the differences between cross‑border gas transmission activities as a whole and internal gas transmission activities as a whole, and unless those differences concern criteria which are relevant under Regulation No 1775/2005 and Directive 2003/55.
(1) .
(2)  –	In accordance with the Lisbon Treaty amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon on 13 December 2007 (OJ 2007 C 306, p. 1), the preliminary ruling procedure is now governed by Article 267 TFEU.
(3)  –	OJ 2003 L 176, p. 57.
(4)  –	OJ 2005 L 289, p. 1.
(5)  –	In this Opinion, I shall use the term ‘Community law’ since, ratione temporis, Community law, not EU law, was still applicable at the time of the facts of the main proceedings.
(6)  –	OJ 1991 L 147, p. 37.
(7)  –	OJ 1998 L 204, p. 1.
(8)  –	Laws of 16 March 2007; 21 December 2007; 6 June 2008; 22 December 2008; 10 March 2009; and 6 May 2009.
(9)  – This article included a second paragraph which stated: ‘Without prejudice to the provisions on regulated tariffs and the code of good conduct, access shall be negotiated in good faith’.
That paragraph, which was removed by the Law of 22 December 2008 following the action for failure to fulfil obligations in Case C-475/08 Commission v Belgium [2009] ECR I-0000, is not relevant to this case.
(10)  –	That is the date on which Directive 2003/55 ceases to be valid following its repeal by Article 53 of Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 on common rules for the internal market in natural gas and repealing Directive 2003/55 (OJ 2009 L 211, p. 94).
(11)  –	In Belgium, the supply and transportation of natural gas had historically been carried out by Distrigaz SA, a company in which the Belgian State owned 50 % of the capital. In 2001, as part of the process of liberalising the sector, Distrigaz SA was partially broken up. A new public limited company was thus created which took over the name ‘Distrigaz’ and was made responsible in particular for supply activities, while the existing company retained the transportation activities and changed its name to ‘Fluxys’.
(12)  –	Case C‑71/02 Karner [2004] ECR I‑3025, paragraph 21; and Case C‑286/02 Bellio F.lli [2004] ECR I‑3465, paragraph 28.
(13)  –	Case C‑330/07 Jobra [2008] ECR I‑9099, paragraph 17, and the case-law cited there.
(14)  –	Order in Case C‑116/00 Laguillaumie
[2000] ECR I‑4979, paragraphs 23 and 24; Case C‑295/05 Asemfo
[2007] ECR I‑2999, paragraph 33; and order of 20 January 2010 in Case C‑389/09 Agueda María Saenz Morales
[2010] ECR I-0000, paragraph 13.
(15)  –	Joined Cases 141/81 to 143/81 Holdijk and Others
[1982] ECR 1299, paragraph 6; Case C‑20/05 Schwibbert
[2007] ECR I‑9447, paragraph 21; and Order in Agueda María Saenz Morales, cited above, paragraph 14.
(16)  –	Joined Cases C‑188/10 and C‑189/10 Melki [2010] ECR I-0000, paragraphs 40 to 57.
(17)  –	See recital 2 in the preamble to Directive 2003/55.
(18)  –	The reasons for the existence of such a monopoly are set out in Olbricht, T., Netzzugang in der deutschen Gaswirtschaft,
Düsseldorfer Schriften zum Energie- und Kartellrecht, Verlag Energiewirtschaft und Technik, 2008, p. 56 et seq.
(19)  –	See recital 2 in the preamble to Directive 2003/55.
(20)  –	These are contracts concluded between the entities responsible for natural gas grids and for the quality of the service provided by them and, where appropriate, with the entities responsible in the Member States for imports and exports of natural gas, the entities responsible for the grids being listed exhaustively in the annex to Directive 91/296.
(21)  –	See point 67 of this Opinion.
(22)  –	Case C‑342/93 Gillespie and Others
[1996] ECR I‑475, paragraph 16; Case C‑106/01 Novartis Pharmaceuticals
[2004] ECR I‑4403, paragraph 60; Case C‑33/08 Agrana Zucker
[2009] ECR I‑5035, paragraph 46; and Case C‑519/07 P Commission
v Koninklijke FrieslandCampina
[2009] ECR I-8495, paragraph 100.
(23)  –	See to that effect Case 6/71 Rheinmühlen Düsseldorf
[1971] ECR 823, paragraph 14; Joined Cases 117/76 and 16/77 Ruckdeschel and Others
[1977] ECR 1753, paragraph 8; Case C‑280/93 Germany
v Council [1994] ECR I‑4973, paragraph 74; and Case C‑127/07 Arcelor Atlantique et Lorraine and Others
[2008] ECR I‑9895, paragraph 26. See also, Hernu, R., ‘Principe d’égalité et principe de non‑discrimination dans la jurisprudence de la Cour de justice des Communautés européennes’, LGDJ, 2003, p. 357, who considers that situations are not similar or singular per se; rather, a situation must be assessed exclusively by reference to the subject-matter and purpose of the rule.
(24)  –	Unlike the tariffs for ‘conveyance’ activities, which must comply with that guideline in accordance with Article 15/5b(2) of the 2005 Gas Law.
(25)  –	Unlike the tariffs for ‘conveyance’ activities, which must comply with that guideline in accordance with Article 15/5b(4) of the 2005 Gas Law.
(26)  –	Unlike the tariffs for ‘conveyance’ activities, which must comply with that guideline in accordance with Article 15/5b(5) of the 2005 Gas Law.
(27)  –	Unlike the tariffs for ‘conveyance’ activities, which must comply with that guideline in accordance with Article 15/5b(8) of the 2005 Gas Law.
(28)  –	See points 78 to 81 of this Opinion.
(29)  –	See to that effect Case 114/76 Bela-Mühle Bergmann
[1977] ECR 1211, paragraph 7; Case 245/81 Edeka Zentrale
[1982] ECR 2745, paragraphs 11 and 13; Case C‑122/95 Germany
v Council
[1998] ECR I-973, paragraphs 68 and 71; Case C‑535/03 Unitymark and North Sea Fishermen’s Organisation
[2006] ECR I-2689, paragraphs 53, 63, 68 and 71; and Arcelor Atlantique et Lorraine and Others, cited above, paragraph 47.
(30)  –	See in particular the first paragraph of Article 3(1) of Regulation No 1775/2005 and recitals 6 and 7 to in the preamble to that regulation and recital 16 in the preamble to Directive 2003/55.
(31)  –	See in particular the first paragraph of Article 3(1) of Regulation No 1775/2005 and recital 6 in the preamble to that regulation.
(32)  –	See in particular recital 7 in the preamble to Regulation No 1775/2005.
(33)  –	See in particular the first paragraph of Article 3(1) of Regulation No 1775/2005 and recital 7 in the preamble to that regulation.
(34)  –	See Article 3(3) and (4) of Directive 2003/55.
(35)  – See in particular the third paragraph of Article 3(1) of Regulation No 1775/2005.
(36)  –	See points 78 to 81 of this Opinion.
(37)  –	See by analogy points 57 to 59 of the Opinion of Advocate General Kokott in Case C‑19/02 Hlozek [2004] ECR I‑11491.
(38)  –	See recital 31 in the preamble to Directive 2003/55, which states that the objective pursued in adopting Directive 2003/55 and repealing Directive 91/296 is to take measures to enable the establishment of a homogenous and non‑discriminatory regime in the field of transportation activities, including cross-border flows of gas between Member States. See also recitals 1 and 6 to 8 in the preamble to Directive 2003/55.
(39)  –	It also makes it possible to determine which barriers to cross-border flows can be eliminated not by the application of the principle of non‑discriminatory access but, where appropriate, by another measure adopted by the Community legislature.
(40)  –	See Article 3(2) of Regulation No 1775/2005, which provides that tariffs for network access must not distort trade across borders between different transmission systems.