COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on establishing an information exchange mechanism with regard to intergovernmental agreements and non-binding instruments between Member States and third countries in the field of energy and repealing Decision No 994/2012/EU
Date: 2016-02-16
Institutions: Directorate-General for Energy, European Commission
Subjects: EU Member State, energy cooperation, energy supply, exchange of information, intergovernmental cooperation (EU), international agreement, self-sufficiency in energy, single market, third country

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 16.2.2016  SWD(2016) 27 final   COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a Decision of the European Parliament and of the Council on establishing an information exchange mechanism with regard to intergovernmental agreements and non-binding instruments between Member States and third countries in the field of energy and repealing Decision No 994/2012/EU {COM(2016) 53 final} {SWD(2016) 28 final}  
 
 
Table of Contents 

Introduction ..................................................................................................................... 3 
1. 
2.  Procedure ......................................................................................................................... 4 
2.1. 
Identification ............................................................................................................ 4 
2.2.  Organisation and timing ........................................................................................... 5 
2.2.1.  Drafting process ................................................................................................... 5 
2.2.2. 
Impact Assessment ................................................................................................ 5 
2.3.  Consultation and expertise ....................................................................................... 6 
2.4.  External expertise ..................................................................................................... 6 
3.  Problem Description ........................................................................................................ 6 
3.1.  Context of the problem ............................................................................................ 6 
3.2.  Nature and extent of the problem ............................................................................. 8 
Impact of IGAs on EU's internal market and energy security ............................. 8 
3.2.1. 
3.2.2.  Evaluation of the application of the current IGA Decision ................................. 9 
3.2.3.  Relevance of IGAs for the current energy sector ............................................... 11 
3.2.3.1.  Relevance of IGAs for existing infrastructures: ............................................. 11 
3.2.3.2.  Relevance of IGAs for future infrastructure projects ..................................... 12 
3.2.3.3.  Relevance of IGAs for energy supplies ........................................................... 13 
3.2.4.  Relevance of IGAs in the current political context ............................................ 14 
Specific drivers or factors relating to the current IGA Decision ....................... 15 
3.2.5. 
3.3.  Subsidiarity and the varying situation of Member States ...................................... 19 
3.3.1.  Necessity of EU action ....................................................................................... 19 
3.3.2.  EU added-value .................................................................................................. 19 
4.  Objectives ...................................................................................................................... 21 
4.1.  General objectives .................................................................................................. 21 
4.2.  Specific objectives ................................................................................................. 21 
5.  Policy options ................................................................................................................ 22 
5.1.  Option 1: Baseline scenario ................................................................................... 22 
5.2.  Option 2: Improved implementation: model clauses ............................................. 22 
5.3.  Option 3: Obligatory ex-ante assessment by the Commission .............................. 23 
5.4.  Option 4: Obligatory participation of the Commission in negotiations ................. 24 
5.5.  Option 5: Commission to negotiate EU agreements in the field of energy ........... 25 
6.  Assessment of the impacts of the various policy options .............................................. 26 
Impacts of option 1: baseline scenario ................................................................... 27 
6.1. 
Impacts of option 2: model clauses ........................................................................ 28 
6.2. 
Impacts of option 3: obligatory ex-ante assessment by the Commission .............. 29 
6.3. 
Impacts of option 4: obligatory participation of the Commission in negotiations  31 
6.4. 
Impacts of option 5: Commission to negotiate EU agreements in the field of 
6.5. 
energy ............................................................................................................................... 32 
7.  Comparison of the options ............................................................................................ 33 
8.  Monitoring and evaluation ............................................................................................ 35 
Annex 1: Evaluation report on the application of the current IGA Decision ....................... 36 
Annex 2: Rights and obligation under the current IGA Decision ........................................ 49 
Annex 3: Analysis of the responses to the public consultation ............................................ 50 

2 

 
 
 
 
 
 
1.  INTRODUCTION 

The  goal  of  the  Energy  Union  Strategy,  adopted  on  25  February  20151,  is  to  give  EU 
consumers  -  households  and  businesses  -  secure,  sustainable,  competitive  and  affordable 
energy. 

To  achieve  this  goal,  the  Energy  Union  Strategy  proposes  a  fundamental  transformation  of 
Europe's energy system, based on a vision of an Energy Union, based on true solidarity and 
trust,  and  of  an  Energy  Union  that  speaks  with  one  voice  in  global  affairs.  This  vision 
translates  into  concrete,  mutually-reinforcing  proposals,  notably  in  the  field  of  energy 
security, one of which is to increase transparency on energy supply. 

More precisely, the Energy Union Strategy indicates that: "an important element in ensuring 
energy (and in particular gas) security is full compliance of agreements related to the buying 
of energy from third countries with EU law", building on the analysis already carried out in 
the  European  Energy  Security  Strategy2  of  May  2014.  In  the  same  spirit,  the  European 
Council in its conclusions of 19 March 2015 also called for "full compliance with EU law of 
all  agreements  related  to  the  buying  of  gas  from  external  suppliers,  notably  by  reinforcing 
transparency of such agreements and compatibility with EU energy security provisions". 

To  achieve  such  compliance,  an  information  exchange  mechanism  with  regard  to 
intergovernmental agreements (IGAs) between Member States and third countries in the field 
of  energy  was  established  by  a  Decision  adopted  by  the  Parliament  and  Council  on  25 
October 2012, which entered into force on 17 November 2012 (the IGA Decision)3. The main 
feature of this mechanism is that the Commission carries out compliance checks of IGAs after 
a Member State and a third country have concluded such agreements. 

Since 2012, the Commission has gained significant experience in the implementation of this 
mechanism.  In  general,  the  Commission's  assessment  is  that  while  the  current  system  is 
useful for receiving information on existing IGAs and for identifying problems posed by 
them  in  terms  of  their  compatibility  with  EU  law,  it  is  not  sufficient  to  solve  such 
problems.  In  particular,  as  stated in  the  Energy  Union  Strategy:  "in  practice,  we  have  seen 
that  renegotiating  such  agreements  is  very  difficult.  The  positions  of  the  signatories  have 
already  been  fixed,  which  creates  political  pressure  not  to  change  any  aspect  of  the 
agreement". 

In the new context of the Energy Union Strategy and in accordance with its Action Plan, the 
Commission  is  therefore  considering  a  revision  of  the  IGA  Decision.  The  present  Impact 
Assessment  identifies  the  problems  in  the  current  information  exchange  mechanism  with 
regard to IGAs. Further, it demonstrates the reasons for the current system being insufficient 
to achieve its major goal, which is to ensure full compliance of IGAs with EU law. It assesses 
options to improve it in order to increase the transparency of IGAs and their compliance with 
EU law, with the overall objective of reinforcing EU energy security. 

1 COM/2014/0330 final 
2 COM (2014)330 
3 Decision 994/2012/EU establishing an information exchange mechanism with regard to intergovernmental 
agreements (IGAs) between Member States and third countries in the field of energy 

3 

 
 
 
 
 
 
 
 
                                                 
Relation with other EU initiatives 

The  Energy  Union  Strategy  foresees  in  its  Action  Plan  a  number  of  actions  to  increase  the 
energy  security  of  the  EU.  The  present  Impact  Assessment  should  therefore  be  seen  in  the 
context  of  other  initiatives  including  the  on-going  revision  of  the  Security  of  Gas  Supply 
Regulation and a foreseen Recommendation on Article 103 of the Euratom Treaty providing 
for a specific ex-ante procedure for the EURATOM related IGAs4. 

The IGA Decision is closely linked to the Security of Gas Supply Regulation, but the scope of 
the information exchange mechanism it establishes is wider. The IGA Decision defines IGAs 
as  "legally binding  agreements  between  one  or  more  Member  States  and  one  or  more  third 
countries having an impact on the operation or the functioning of the internal energy market 
or  on  the  security  of  supply  in  the  Union".  The  IGA  Decision  thus  applies  to  all  energy 
commodity related supply and infrastructure IGAs, in particular gas, oil and electricity. Only 
IGAs concerning matters within the purview of the Euratom Treaty are not covered. For these 
IGAs Article 103 of the Euratom Treaty provides for a specific ex-ante procedure. 

The scope of the IGA Decision excludes commercial contracts between commercial entities5. 
The present Impact Assessment will not consider the issue of commercial contracts related to 
IGAs since, as indicated in the Energy Union Strategy, this will be done, for commercial gas 
supply contracts, in the context of the review of the Security of Gas Supply Regulation, where 
"the  Commission  will  also  propose  to  ensure  appropriate  transparency  of  commercial  gas 
supply  contracts  that  may  have  an  impact  on  EU  energy  security,  while  safeguarding  the 
confidentiality of sensitive information". The Impact Assessment developed for the review of 
the  Security  of  Gas  Supply  Regulation  is  covering  this  specific  issue.  This  approach  also 
corresponds with  the result  of the Public Consultation on the IGA Decision review (see  2.3 
below) in which an overwhelming majority of the respondents either did not mention the need 
to  include  commercial  contracts  or  clearly  expressed  the  view  that  commercial  contracts 
should stay out of the scope of the IGA Decision. 

2.  PROCEDURE 

2.1. 

Identification  

(1) Lead DG: DG ENER 

(2) Associated DGs: SG, LS, DG CLIMA, DG COMP, DG GROW, DG ECFIN, DG ENV, 
DG HOME, DG NEAR, DG TRADE, EEAS, JRC, JUST  

(3) Agenda planning/WP references: 2016/ENER/005. 

4 These IGAs are excluded from the current IGA Decision 
5  Recital  7  of  the  IGA  Decision  stresses  that  this  Decision  does  not  create  obligations  as  regards  agreements 
between  commercial  entities.  This  recital  makes  also  clear  that  Member  States  may,  on  a  voluntary  basis, 
communicate to the Commission commercial agreements that are explicitly referred to in IGAs. 

4 

 
 
 
 
 
 
 
                                                 
2.2.  Organisation and timing  

2.2.1.  Drafting process 

The process that led to drafting this Impact Assessment on the revision of the IGA Decision 
has followed a number of steps. 

It builds on the directions set by the European Energy Security Strategy (EESS) of May 2014 
as well as the key remaining challenges identified in the Energy Union Strategy of February 
2015. 

It also builds on the experience that the Commission has gained on the implementation of the 
IGA Decision since it entered into force on 17 November 2012 and which has been analysed 
in the evaluation report annexed to this Impact Assessment. 

Moreover, a public consultation was organized between July 28th and October 22nd 2015. The 
Commission  received  some  25  responses  from  stakeholders,  including  Member  States  and 
several  associations  (regulatory  and  industry),  and  the  level  of  response  to  the  consultation 
can be considered satisfactory. A summary analysis of the responses can be found in Annex 3, 
the  main  findings  of  which  have  been  taken  into  consideration  at  key  stages  of  this  Impact 
Assessment.  The  non-confidential  responses  and  a  summary  document  have  been  published 
on  the  website6.The  EU's  Gas  Coordination  Group  also  discussed  specific  elements 
considered for revision in a workshop dedicated to security of supply at large, on 4 May 2015. 

Finally, the drafting on this Impact Assessment started in July 2015 with the help of an inter-
service  steering  group  which  has  been  consulted  regularly  and  at  each  stage  of  its 
development. 

Key dates in this process were: 

  28 May 2014   
  16 October 2014 
  16 October 2014 
  25 February 2015 
  19 March 2015 
  21 September 2015 
  5 October 2015 
  19 October 2015 
  30 October 2015 
  11 November 2015 
  2 December 2015 

2.2.2.  Impact Assessment 

European Energy Security Strategy 
Stress Test communication 
Report on the implementation of Regulation 994/2010 
Energy Union Strategy 
European Council conclusions on energy issues 
1st meeting of the Inter-service Steering Group (ISG) 
2nd meeting of the ISG 
3rd meeting of the ISG 
4th meeting of the ISG 
Submission of the Impact Assessment to the RSB7 
Scheduled RSB Meeting date 

The Impact Assessment has been prepared by DG ENER assisted by an Inter-service Steering 
Group  made  up  of  representatives  invited  from  the  following  Directorates  General:  the  SG, 
LS, DG CLIMA, DG COMP, DG GROW, DG ECFIN, DG ENV, DG HOME, DG NEAR, 
DG TRADE, JRC, DG JUST as well as the EEAS. 

6 https://ec.europa.eu/energy/en/consultations/consultation-review-intergovernmental-agreements-decision  
7 Regulatory Scrutiny Board (RSB) 

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
This  impact  assessment  received  a  positive  opinion  from  the  Regulatory  Scrutiny  Board  on 
December  4th  2015.  The  Regulatory  Scrutiny  Board's  recommendations  for  further 
improvement  (without  the  need  for  a  resubmission)  were  fully  taken  into  account,  notably 
through amendments in the following main areas:  

  Clarification  of  the  baseline  scenario,  in  particular  as  regards  the  relevance  of  IGAs 

for the future; 
Improved assessment of option 2 (obligatory model clauses). 

 

2.3.  Consultation and expertise 

As described in section 2.2.1, DG ENER repeatedly solicited input to the review of the IGA 
Decision from all segments of the energy sector from the outset, in particular Member States, 
including  on  the  problem  definition  and  on  specific  technical  elements.  The  consultations 
included a 12 week public web-based consultation (July to October 2015) as well as dedicated 
meetings,  including  as  part  of  the  EU's  Gas  Coordination  Group  (04/05/2015)  and  of  the 
Strategic Group on International Energy Relations (07/05/2015). 

2.4.  External expertise 

Information related to the implementation of the IGA Decision is partly confidential, both due 
to  some  of  the  provisions  of  the  IGA  Decision  itself  (Article  4  –  Confidentiality)  or  due  to 
certain exceptions set out in Regulation 1049/20018 on public access to European Parliament, 
Council and Commission documents (Article 4 (1) (a), 3rd indent - Protection of international 
relations, Article 4 (5)  - Request by a Member State not to  disclose a document originating 
from that Member State without its prior agreement or Article 4 (2), 2nd indent - Protection of 
court proceedings and legal advice). Inter alia for these confidentiality issues, it was decided 
not to develop an external study on the implementation of the current IGA Decision. 

3.  PROBLEM DESCRIPTION 

3.1.  Context of the problem 

Stable and secure energy supplies are important for a predictable economic environment for 
the industrial sector and ultimately consumers in the European Union. However, EU's energy 
dependency is increasing. In less than 25 years (from 1990 to 2013), the share of net imports 
of  energy  products  in  the  EU  has  increased  from  45%  to  55%  of  gross  inland  energy 
consumption9. With the depletion of traditional indigenous sources, this share is projected to 
rise further even though the increase will be mitigated by the increased use of new indigenous 
sources  such  as  renewable  energy.  Member  States  are  consequently  seeking  new  energy 
supplies  outside  of  the  EU.  Negotiations  with  energy  suppliers  in  third  countries  frequently 
require  political  and  legal  support  in  the  form  of  the  conclusion  of  intergovernmental 
agreements (IGAs). IGAs are normally negotiated bilaterally and are often the basis for more 
detailed commercial contracts. Different categories of IGAs can be distinguished: 

8 OJ L 145, 31.5.2001, p.43 
9 Source: Eurostat Energy Statistics, 2015. 

6 

 
 
 
 
                                                 
 

 

 

IGAs  used  to  provide  legal  certainty  for  the  construction  of  import  and  export 
infrastructure,  most  notably  cross-border  oil,  gas  and  electricity  infrastructure, 
including LNG facilities; 
IGAs relating to  the purchase, or  to the facilitation  of the  purchase, of a commodity 
such as oil or gas; 
IGAs  of  a  general  nature  establishing  a  framework  for  bilateral  energy  cooperation 
between  Member  States  and  third  parties,  either  in  general or  in  a  specific  field  (for 
instance  IGAs  that  set  a  framework  for  the  exchange  of  expertise  in  the  field  of 
renewable energy). 

7 

 
 
 
3.2.  Nature and extent of the problem 

3.2.1.  Impact of IGAs on EU's internal market and energy security 

In  line  with  the  rules  of  the  internal  EU  electricity  and  gas  markets,  in  particular  of  the 
provisions  of  the  Second  and  Third  Energy  Packages,  Member  States  have  introduced 
significant requirements in their energy legislation. Compliance with these requirements is not 
always  in  the  commercial  interest  of  third  country  energy  suppliers.  Member  States  can 
therefore  come  under  pressure  to  include  regulatory  concessions  in  their  IGAs  with  third 
countries and such concessions can threaten the operation, integrity and functioning of the EU 
internal energy market. 

Regulatory concessions in IGAs can threaten a number of key areas of the EU acquis: 

  The  Third  Energy  Package:  the  introduction  of  the  Third  Energy  Package  has 
furthered  the  EU's  efforts  to  open  up  energy  markets.  Member  States  are  obliged  to 
unbundle energy supplies from transmission networks, therefore allowing the entry of 
new market participants to energy supply markets. Implementation of the third energy 
package  has  had  a  positive  impact  on  EU  gas  markets  as  evidenced  by  the 
development  of  wholesale  gas  prices,  but  can  be  threatened  by  IGAs  that  notably 
reduce  the  independence  of  entities  supplying  gas  from  the  operators  of  the  gas 
infrastructure.  These  incompatible  clauses  typically  prevent,  for  example,  ownership 
the 
unbundling, 
independence of the national regulator. 

third  party  access  and  competitive 

tariff  setting, 

including 

  Competition  rules:  these  rules  as  enshrined  in  the  Treaty  also  provide  for  strong 
powers  to  ensure  the  proper  functioning  of  the  internal  market.  Enforcement  of 
competition  rules  ensures  that  anti-competitive  provisions  of  supply  contracts  are 
prohibited and sanctioned and that, ultimately, energy markets function properly. Anti-
competitive clauses in IGAs may include for example territorial restriction clauses in 
IGAs which prevent the cross-border sale of gas (for example through (re-)export bans 
and  destination  clauses).  Anti-competitive  clauses  in  related  supply  contracts,  which 
may  be  inspired  by  the  IGA,  may  also  achieve  the  same  objective  indirectly,  i.e. 
clauses  which  incentivize  the  buyer  not  to  re-sell  the  gas  (e.g.  dual  pricing 
mechanisms,  information  obligations  etc.)  or  may  include  provisions  relating  to 
pricing or other terms and conditions that may infringe competition rules. 

  EU  public  procurement  rules:  energy  infrastructure  projects  implemented  with  third-
country  participation  require  strict  scrutiny  regarding  the  application  of  EU  public 
procurement  rules  as  non-compliances  detected  following  the  establishment  of  the 
legal framework for a project can result in delays, additional costs and can eventually 
jeopardise an entire infrastructure project. Recent cases highlight problems related to 
the direct awarding of the projects, including subcontracting, by the main developer. 

Non-compliant IGAs, as analysed in the following section, often combine provisions that are 
incompatible with a number of these areas of the EU acquis. 

To give a concrete example of what a clause that is incompatible with Union law would mean 
for  the  internal  energy  market,  the  Commission  was  notified  an  IGA  signed  between  a 
Member  State  and  a  large  third  country  for  the  supply  of  oil.  This  IGA  contained  a  clause 

8 

 
 
 
 
 
 
 
 
specifying  that  a  given  amount  of  oil  should  stay  in  the  market  of  that  Member  State.  This 
constitutes a typical "destination clause". The practical effect of such a destination clause is 
that  it  prevents  a  given  energy  commodity  from  flowing  freely  from  one  Member  State  to 
others. It therefore impedes the proper functioning of the EU internal energy market. 

3.2.2.  Evaluation of the application of the current IGA Decision 

To tackle the above mentioned challenges, the European Council of 4 February 2011 invited 
Member States to inform the Commission from 1 January 2012 of all their new and existing 
bilateral  energy  agreements  with  third  countries10.The  IGA  Decision  of  25  October  2012 
transformed  the  Conclusions  of  the  European  Council  into  a  mechanism  with  detailed 
procedures11  for  the  exchange  of  information  between  Member  States  and  the  Commission 
with regard to IGAs. 

The  Commission  has  carried  out  a  fully-fledged  evaluation  report  of  the  current  IGA 
Decision,  which  is  annexed  to  the  present  Impact  Assessment.  The  main  conclusion  of  this 
report is that while the current system established by the IGA Decision is generally useful to 
identify incompatibilities of IGAs with EU law, it is not efficient in transforming concluded 
non-compliant IGAs into compliant ones. 

As detailed in the evaluation report in annex, 124 IGAs were notified by Member States to 
the Commission following the adoption of the IGA Decision. All of these IGAs, but one, were 
signed before the entry into force of the IGA Decision. 

Around  60%  of  these  IGAs  concerned  general  energy  cooperation,  mainly  bilateral 
cooperation between EU Member States and a wide range of third countries. These IGAs did 
not  raise  concerns  of  compatibility  with  EU  law  and  the  Commission  did  not  follow-up  on 
them. 

The  remaining  IGAs  cover  specific  agreements  on  the  supply,  import  or  transit  of  energy 
products (such as oil, gas or electricity) or agreements for the development of energy related 
infrastructures, with a great majority related to oil and gas pipelines. After analysing the latter, 
the Commission has expressed doubts on the compatibility with EU law of 17 IGAs. 

So, even if a number of the notified IGAs were in line with the EU Law; around 1/3 of 
the  most  relevant  IGAs,  i.e.  those  related  to  energy  infrastructures  or  the  supply  of 
energy  commodities12  contained  provisions  that  were  not  compliant  with  EU  law.  In 
addition,  some  of  these  non-compliant  IGAs  resulted  in  very  complex  legal  situation 
situations within Member States, between Member States, and with third countries. 

To  illustrate  the  impact  that  such  incompatible  IGAs  might  have  on  the  EU  energy  market, 
one could take the example of the South Stream project. This project, underpinned by 6 non-
compliant IGAs, was originally designed to transport around 60 billion cubic meters of gas a 
year. This would have represented around 21% of total annual EU gas imports. 

10 This conclusion was confirmed by the Energy Council of 28th February 2011: "Improved and timely exchange 
of information between the Commission and Member States including Member States information to 
Commission on their new and existing bilateral energy agreements with third countries". 
11 See detailed provisions in annex. 
12 See evaluation report in annex. 

9 

 
 
 
 
 
 
 
 
 
 
                                                 
The  South  Stream  case  has  become  a  striking  example  of  such  a  complex  situation.  South 
Stream was a Russia-driven gas pipeline project designed to cross the Black Sea from Russia 
to Bulgaria and further on to Austria and/or Italy. Pipeline branches to Hungary, Serbia and 
Slovenia were also under consideration. Initial supplies were planned to take place in the fall 
of 2015. The individual national stretches of the South Stream pipeline were to be developed 
by national joint ventures owned by Gazprom and the local gas incumbents. 

Russia signed IGAs with a number of concerned EU Member States13, with the exception of 
Italy,  in  order  to  facilitate  the  construction  and  operation  of  the  pipeline.  The  Commission 
considered, however, that these IGAs and their implementation were in conflict in particular 
with  the  EU's  internal  energy  market  rules  (for  instance  Third  Energy  Package).  Despite 
Commission concerns regarding non-compliance with EU law, project implementation began 
in  some Member States. In  March 2014, the Commission set up a  Working Group between 
the  Commission  and  the  Russian  Federation/Gazprom  to  try  to  find  a  sound  legal  and 
regulatory framework for the South Stream project. Two meetings of the Working Group took 
place  in  2014  but  did  not  lead  to  any  agreement.  Following  the  Ukraine  crisis  and  the 
initiation of a WTO dispute procedure by Russia with respect to the Third Energy Package, 
the  work  taking  place  within  the  South  Stream  Working  Group  was  suspended.  On  1 
December 2014, President Putin announced in a press conference that South Stream would be 
discontinued.  

The fact that the Commission was able to address the non-compatibility of the South Stream 
related  IGAs  only  ex-post  created  a  complex  and  difficult  legal,  political  and  economic 
situation for the parties involved. 

This example illustrates a systemic difficulty that the Commission and the Member States are 
facing with non-compliant IGAs under the current IGA decision. As mentioned above, after 
analysing the IGAs notified by Member States, the Commission has expressed doubts on the 
compatibility  with  EU  law  of  17  IGAs.  Letters  were  consequently  sent  to  the  9  Member 
States concerned in 2013. These Member States were invited to amend or terminate the IGAs 
in question in order to resolve the identified incompatibilities. However, to date, no Member 
State has managed to renegotiate or terminate the IGAs in question. 

So far, the Commission has not launched any infringement procedures against the concerned 
Member  States.  This  is  partly  due  to  the  fact  that  the  South  Stream  project,  which  was  the 
subject of 6 out of the 17 incompatible IGAs, has been discontinued. Furthermore, some IGAs 
ceased  to  apply  because  the  initial  duration  of  the  IGA  has  expired  in  the  meanwhile  or 
because a specific condition set out in the IGA was not fulfilled in due time. The Commission 
is still considering whether launching infringement procedures would be appropriate for IGAs 
which are still in force, taking into account the specific legal situation of each Member State 
concerned. For more details please refer to section 3.2.4 of this Impact Assessment. 

13 Bulgaria, Hungary, Slovenia, Austria, Greece, Croatia. An IGA was also signed with Serbia and the Former 
Yugoslav Republic of Macedonia (Energy Community member and as such subject to similar obligations under 
the Second Energy Package). 

10 

 
 
 
 
                                                 
3.2.3.  Relevance of IGAs for the current energy sector 

Another  finding  of  the  evaluation  report  is  that  since  2012,  only  one  new  IGA  has  been 
notified  to  the  Commission.  On  the  basis  of  this  information  alone,  one  could  draw  the 
conclusion that recent changes in the way energy commodities are imported in the EU have 
made IGAs less relevant for the energy sector. The Commission's assessment however is that 
the  experience  of  the  last  3  years  alone  does  not  provide  a  full  picture  of  the  long-term 
relevance of IGAs.  

Indeed, the analysis of all the notified IGAs (some of which have been signed for a period of 
30 years) shows that, in the case of major energy infrastructure investments as well as (to a 
lesser  extent)  for  energy  products  imports,  the  conclusion  of  IGAs  will  continue  to  play  an 
essential role. For example, three of out the currently existing non-compliant IGAs (which do 
not concern South Stream but are related to oil or gas supply and transit) will terminate within 
one year and could be re-opened for negotiation. Apart from the IGAs up for re-negotiations, 
the Commission expects more IGAs in the case of major energy infrastructure investments, as 
well as for energy products imports, within the coming years. 

3.2.3.1. 

Relevance of IGAs for existing infrastructures: 

IGAs  continue  to  be  relevant  in  the  physical  delivery  of  commodities  to  the  EU. 
Significant infrastructure projects of the past (and future) continue to rely on public support in 
the form of IGA's that will need to be agreed/renewed in the coming years. 

In the case of gas supplies, the share of piped gas in the total extra-EU imports has reached 
90% in 2014, which represents roughly 257 bcm out of a total of 286 bcm. The majority of 
the gas pipelines connecting the EU to its trading partners were commissioned in the period 
from the late 1970s to the late 1990s and were based on contractual agreements between the 
project  promoters  and  often  underpinned  by  one  or  several  agreements  between  the 
producing, transiting and receiving countries14. 

With  regards  to  oil:  90%  of  EU  crude  oil  imports  is  sea-borne  and  only  10%  arrives  via 
pipeline,  an  infrastructure  that  might  require  an  IGA  by  project  developers.  For  example  a 
number of refineries in the Baltics and Central Europe are reliant to differing degrees on the 
Druzhba pipeline connecting production fields in the Russian Federation to the region. Similar 
to the case of natural gas described above, the Druzhba pipeline system was built in the '60s 
and '70s. 

With regards to electricity: the share of extra-EU net imports in gross electricity generation is 
less than 1% for the EU2815. As in the case of crude oil, there are several EU Member States 
that  exchange  actively  with  non-EU  neighbouring  countries.  Croatia,  Lithuania  and  Latvia 
import more than 20% of their electricity. In particular, after the Ignalina nuclear power plant 
was shut down at the end of 2009, Lithuania heavily relies on electricity imports. In 2012 the 
country imported 29% of its annual power needs from Russia via a 750 kV transmission line 
and 25% from Belarus (through several transmission lines of 300-330 kV voltage). In spite of 
EU's efforts to integrate them more closely with the rest of Europe, for the time being some 
isolated  electricity  systems  (notably  the  Baltic  Member  States)  heavily  rely  on  electricity 

14 For more details see the evaluation report on the application of the IGA Decision in annex 
15 Source: annual data from ESTAT 

11 

 
 
 
 
 
 
 
 
                                                 
imported via cables from third countries. Similar to gas and oil, the connecting infrastructure 
was constructed several decades ago. 

In summary, either a large share of the commodities at the EU level (in the case of gas) or a 
critical share for specific EU Member States (in the case of oil and electricity) is imported in 
the EU from third countries via physical connections (pipelines or cables). The construction 
of  such  complex  infrastructures,  in  some  cases  spanning  several  thousand  kilometers,  was 
often and is still based on complex contractual agreements between the project promoters and 
often  underpinned  by  one  or  several  agreements  between  the  producing,  transiting  and 
receiving countries. 

Some  of  these  IGAs,  signed  for  a  long  period  of  time  (15  to  30  years),  will  need  to  be 
renewed or amended (this was the case of the recent IGA between Russia and Slovakia on oil 
supply,  which  renews  the  previous  one  signed  in  1999).  Due  to  the  long  time  span  of  such 
IGAs, their renewal and notification is thus subject to a cycle effect. It is thus not the number 
of  notified  IGAs  that  matters  but  the  importance  of  the  projects  they  underpin  and  their 
compliance  with  EU  law.  With  respect  to  the  renewal  of  IGAs  for  older  infrastructure,  the 
initial construction-related risks may also be mitigated at this point, meaning that it may be all 
the more important to now carry out an assessment of the IGA's compliance with EU law. A 
number  of  IGA's  will  therefore  continue  to  require  careful  legal  follow  up.  With  regard  to 
transit/transport of gas, for example, some IGAs still prescribe a number of clauses which go 
against the modern entry/exit system (e.g. some IGAs mandate physical metering of gas and 
de facto prevent the shift to the modern entry/exit system). 

3.2.3.2. 

Relevance of IGAs for future infrastructure projects 

The  EU's  import  dependency  is  expected  to  remain  at  least  stable  or  increase  over  the  next 
two  decades16  (for  fuels,  technology  and  other  materials).  Even  if  a  limited  number  of  new 
energy corridors are expected to be developed in the coming years, each of the potential new 
infrastructures  can  have  a  systemic  impact  on  the  entire  European  Union  energy 
market.  It  is  therefore  essential  that  they  are  compatible  with  EU  law.  IGAs  will 
continue to play an essential role from that perspective. 

This is even more relevant today, because for new infrastructure projects the number of issues 
typically referred to in IGAs is increasing. As energy routes increase in length, the number, 
legal  hierarchy  and  complexity  of  these  agreements  is  also  increasing,  so  that  a  simple 
network  connection  that  would  have  been  effected  without  an  IGA  in  the  1970s  (such  as  a 
North Sea gas connection) is now effected increasingly through a series of overlapping, often 
conflicting IGAs. To give an example, a network connection from Baku to the EU under the 
aegis of the Southern Corridor initiative involves up to 20 different agreements, more of half 
of  them  being  IGAs  and  agreements  between  governments  and  companies  (so  called  "Host 
Government Agreements"). For fuels, liability is a major issue that can only be dealt with by 

16 In 2013, indigenous EU production represented about 35% (157 bcm) of total EU gas consumption of ca. 450 
bcm. About 290 bcm were imported through pipelines from Russia (27%), Norway (21%), and Algeria (8%) and 
Qatar (5%). Consequently, with total EU production expected to decrease by 2030 to about 110 bcm per year 
(while conventional gas production is projected to diminish from currently ca. 140 bcm to about 80 bcm in 2030, 
any  increases  in  non-conventional  and  biogas  production  will  not  be  able  to  make  up  for  that  decline  with 
expected  contributions  of  respectively  about  15  bcm  and  13  bcm  in  2030)  and  overall  EU  demand  in  2030 
expected to lie in a range between 380 and 450 bcm (in line with the different PRIMES scenarios), EU import 
needs are likely to be within a range between 270 and 340 bcm in 2030. See also intermediate scenarios in 2015 
ENTSOG's 10 year network development plan, http://user-30078157.cld.bz/ENTSOG-TYNDP-2015 

12 

 
 
 
 
 
 
                                                 
governments and nearly all network connections are subject to bilateral or multilateral IGAs. 
Through  the  liability  issue,  jurisdiction  must  also  be  asserted,  which  implicates  tax.  In  the 
context  of  this  growing  complexity,  IGAs  therefore  keep  all  their  relevance,  notably  for 
potential new energy project development that might occur in the framework of EU's energy 
diversification policy (for instance in the Mediterranean area). 

3.2.3.3. 

Relevance of IGAs for energy supplies 

At  the  EU  level,  the  way  in  which  energy  commodities  are  imported  within  the  internal 
market  has  changed  over  the  last  decade.  As  underlined  by  some  respondents  to  the  public 
consultation  who  questioned  the  need  for  changes  to  the  current  IGA  Decision,  for  gas,  in 
particular, the preferred price setting is tending to shift from long term oil indexed contracts to 
a  market  based  mechanism,  i.e.  hub  pricing.  However,  the  general  shift  towards  gas 
market-based  pricing  mechanisms  does  not  fully  reflect  the  disparities  that  exist 
between  EU  Member  States.  Whereas  Member  States  from  Central  and  Northwestern 
Europe confirm the general trend, other regions of the EU have not yet experienced the switch 
to hub-based pricing. 

13 

 
 
 
 
 
 
 
 
 
Moreover,  the  network-related  IGAs  developed  in  the  last  decades  were  meant  to  reduce 
political risks for the project promoters during the construction phase. To the extent that those 
pipelines  are  operational  since  many  years  and  that  the  construction  risks  are  largely 
mitigated,  it  is  all  the  more  important  that  those  IGAs  or  their  amended  version  are  in 
compliance with EU law. This is also applicable for the network-related IGAs in the case of 
oil  or  electricity.  Hence,  irrespective  of  how  the  commodity  is  priced,  IGAs  will  remain 
relevant in order to agree on the modalities of large-scale infrastructure projects. 

Overall, the Commission's assessment is thus that IGAs will continue to play a key role in the 
EU's energy sector. The IGA Decision is thus fully relevant but needs to adapt to the changing 
nature of energy supplies and routes, which leads to the analysis of the specific problems of 
the current IGA Decision. 

3.2.4.  Relevance of IGAs in the current political context 

Since 2012, when the current IGA Decision was adopted, the political context has changed.  

Firstly, geopolitical developments (such as the crisis in Ukraine) have put security of energy 
supply  at  the  top  of  the  political  agenda.  The  current  political  instability  in  regions  that  are 
crucial also for external energy relations (notably Libya and Syria) might also imply a partial 
re-assessment of Member States' existing security of supply strategies.  Moreover, the South 
Stream  experience  has  illustrated  the  need  for  ensuring  more  legal  certainty  for  large 
infrastructure investments.  

Secondly,  before  the  current  information  exchange  system  was  established  in  2012,  the 
Commission  and  the  Member  States  were  not  aware  of  the  number  and  negative  effect  of 
incompatible IGAs on the internal energy market. 

In  this  new context, compliance of IGAs has  been  increasingly  regarded both  at  an EU and 
national  level  as  a  key  element  for  the  proper  functioning  of  the  internal  market  and  for 
ensuring security of supply. In this spirit, the European Council in its conclusions of 19 March 
2015 also called for "full compliance with EU law of all agreements related to the buying of 
gas  from  external  suppliers,  notably  by  reinforcing  transparency  of  such  agreements  and 
compatibility with EU energy security provisions". 

14 

 
 
 
 
 
 
 
 
 
 
 
 
3.2.5.  Specific drivers or factors relating to the current IGA Decision 

As  illustrated  in  the  section  above  and  in  the  evaluation  report  annexed  to  this  Impact 
Assessment, the main problem with the current IGA Decision is that it is not fulfilling one of 
its principal objectives, which is to ensure compliance of IGAs with EU law. This issue was 
also  identified  as  the  main  problem  by  all  the  respondents  who  expressed  the  view  that  the 
current IGA Decision would need to be reinforced. 

This  problem  is  due  to  a  number  of  factors  related  to  the  provisions  of  the  current  IGA 
Decision. These are listed below, in order of importance: 

A) Incompatible clauses are only detected after the agreement is signed and are difficult 
to change ex-post for political and legal reasons  

The  experience  of  the  Commission  to  date  is  that  the  most  important  factor  in  the  problem 
mentioned  above  is  the  ex-post  nature  of  the  notification  obligation  under  the  current  IGA 
Decision.  

The absence of ex-ante notification to the Commission reduces the potential for coordination 
between Member States. Member States that have less bargaining power than a third country 
with which they are in negotiations may accept provisions requested by that country that are 
clearly incompatible with EU law, in order to get access to energy resources or participate in 
an infrastructure project they consider essential for their own national energy security. 

On the other hand, when Member States have significant bargaining power in such a situation, 
they  may  prefer  to  negotiate  on  their  own  to  keep  their  comparative  advantage  and  get  the 
best deal possible, without necessarily making overall EU energy security their priority. 

After signature of an IGA, changes are difficult. As stated in the Energy Union Strategy: "in 
practice,  we  have  seen  that  renegotiating  (IGAs)  is  very  difficult.  The  positions  of  the 
signatories have already been fixed, which creates political pressure not to change any aspect 
of the agreement". At the post-signature stage there is also a political incentive for Member 
States to avoid tensions with powerful third countries /suppliers. 

15 

 
 
 
 
 
 
 
 
 
 
B) Some IGAs do not contain a legal mechanism for their amendment or termination 

Apart from the political incentive not to change IGAs, the lack of effectiveness of the current IGA 
Decision mechanism,  as  highlighted  in  the  evaluation  report,  is  also  largely  due  to  the  complex 
legal situation that Member States face once they have signed with a third country an IGA that is 
non-compliant with EU law. In general terms, this situation is as follows: 

From the public international law perspective, Member States are obliged to comply with the 
obligations set out in the IGAs they have concluded (see Article 26 of the Vienna Convention 
of  the  Law  of  the  Treaties:  "pacta  sunt  servanda").  The  fact  that  the  IGA  is  not  compliant 
with EU law does not, in principle, release the Member States from the need to comply with 
these obligations since the third country is not a member of the EU and therefore not obliged 
to comply with EU law. 

From the EU law perspective, Member States are obliged to fulfil their obligations under EU 
law. The fact that the third country is not obliged to comply with EU law is of no relevance17. 
Member States must take all appropriate steps to eliminate the incompatibilities between EU 
law and the IGA in question (Articles 351 (2) and 4 (3) TFEU). This means that the Member 
State must renegotiate or terminate the IGA where appropriate. 

For the termination or  renegotiation of IGAs the rules  under public international law apply. 
Termination or renegotiation are, first of all, possible if and to the extent that the termination 
or amendment is expressly foreseen in the IGA. In some specific cases, Member States may 
also have recourse to the termination and adaptation grounds set out in the Vienna Convention 
of the Law of the Treaties18. 

The  practice  of  Member  States  in  this  area  is  not  uniform.  Most  of  the  IGAs  that  the 
Commission considered to be incompatible with EU law were signed for a specific period of 
time,  which  amounted  to  between  15  and  30  years.  Such  IGAs  usually  provided  for  an 
automatic  renewal  of  the  IGA  for  up  to  5  years,  unless  one  of  the  parties  notified  the  other 
party in writing of its intention to terminate the IGA. This notification usually has to be done 
6 or more months prior to the expiration of the initial duration of the IGA or any subsequent 
extension period. In some cases, the notification period can be as long as 4 or 5 years. None of 
the  IGAs  in  question  contained  any  clause  that  would  have  allowed  the  Member  State  to 
terminate the IGA before the expiration of its initial duration. Some IGAs did not foresee any 
specific  duration  and  were  thus  signed  for  an  indeterminate  period19.  Almost  all  IGAs 
contained a clause which allowed the parties to amend the IGA. For this, the consent of the 
other party to the IGA was required. 

On the basis of the provisions described above, Member States have not generally been in a 
position to unilaterally terminate or amend their IGAs, and have only been able to object to 
their  automatic  renewal.  In  this  way  they  have  been  able  to  terminate  old  IGAs  that  were 
signed some 20 or 30 years ago in a relatively short period of time. For more recent IGA they 

17  As  an  exception,  Article  351  (1)  TFEU  allows  MS  to  fulfil  their  obligations  arising  from  international 
agreement with third countries. However, this applies only to international agreement that were signed before the 
respective MS joined the EU. Furthermore, Article 351 (2) TFEU requires MS to take all appropriate steps to 
eliminate incompatibilities between international agreements and the EU Treaties. 
18 For instance Articles 56, 60 and 62 of the Vienna Convention. 
19 In one case the Member States was entitled to withdraw from the IGA after the end of the oil pipeline cost 
recovery period which was, however, not further determined in time. 

16 

 
 
 
 
 
 
 
 
                                                 
have  had  in  principle  to  wait  until  the  expiration  of  the  initial  duration  of  the  IGA  before 
taking such a step. 

To  summarise,  if  a  Member  State  has  concluded  an  IGA  which  is  binding  under  public 
international law and which does not contain a termination or suspension clause it is – in legal 
terms  -  almost  impossible  for  the  Member  State  in  question  to  renegotiate  or  terminate  the 
IGA, within a relatively short period of time, if the third country does not agree to that course 
of  action.  This  greatly  restricts  the  enforcement  powers  of  the  Commission  even  where  an 
infringement procedure would be possible. 

C) No transparency in ongoing IGA negotiations / substitution effect 

Since  the  adoption  of  the  IGA  Decision  the  Commission  has  not  been  notified  by  Member 
States of any ongoing IGA negotiations and has only been notified of one new IGA. 

The  fact  the  Commission  is  not  involved  in  ongoing  IGA  negotiations  reduces  upstream 
coordination  between  the  Commission  and  Member  States.  Moreover,  the  process  of 
negotiations, in which a draft agreement takes shape step by step, article by article, tends to 
result in the positions of the signatories becoming fixed, and creates political pressure not to 
change any aspect of the agreement at the end of the process. 

However, the fact that the Commission is not being invited to participate in IGA negotiations 
appears to be a less important factor than the situation created by the absence of an  ex-ante 
compatibility assessment. The Commission had already gained experience of participating in 
bilateral energy negotiations before the entry into force of the IGA Decision, and the results 
of  that  participation  were  mixed.  The  Commission  as  notably  faced  situations  where,  at  the 
request of a Member State, it provided assistance in pointing out precisely which provisions 
of the draft amendments were in violation of EU energy law, but was not granted access to the 
final  stage  of  the  negotiations,  which  made  it  difficult  for  the  Commission,  at  that  time,  to 
make an informed overall judgment on and to influence the outcome of the process while its 
responsibility and authority was engaged. 

So the fact that the Commission has not been involved in IGA negotiations since 2012 is one 
element  of  the  problem.  However  the  effectiveness  of  such  participation  would  in  any  case 
remain limited and would not replace an in-depth ex-ante compatibility check on the basis of 
a final draft text. The main problem may therefore not be the fact that under the current IGA 
Decision the participation of the Commission in IGA negotiations is not obligatory, but may 
instead relate to two different factors: 

  First, the fact that under the current IGA Decision there is no obligation for Member 
States to notify the Commission of ongoing or future negotiations. Under Article 3(3), 
Member  States  "may  inform  the  Commission  in  writing  of  the  objectives  of,  and  the 
provisions  to  be  addressed  in,  the  negotiations  (…)".  This  means  it  is  difficult  for 
there  to  be  meaningful  political  dialogue  at  an  early  stage  between  Member  States 
themselves or between the Commission and Member States. 

 

 Second, it has to be taken into account that, in practice, Member States also enter into 
agreements  which  are  not  legally  binding,  such  as  memoranda  of  understanding  or 
other non-binding instruments.  

17 

 
 
 
 
 
 
 
 
 
 
 
As  indicated  in  the  evaluation  report,  while  only  one  new  IGA  was  notified  to  the 
Commission since 2012, it is clear that Member States have had contacts with third countries 
about infrastructure developments and also, by inference, commodity supply. Currently, these 
forms of cooperation are not captured by the IGA Decision. Thus, the Commission is not in a 
position  to  assess  the  extent  to  which  Member  States  and  third  countries  have  entered  into 
political  commitments  in  this  regard  (e.g.  in  the  form  of  memoranda  of  understanding, 
exchanges  of  notes  or  letters  of  intent).  However,  the  Commission  has  gained  some 
experience with regard to the existence and effect of such instruments. One example is that a 
section  of  the  South  Stream  project  in  Europe  was  governed  by  a  Memorandum  of 
Understanding.  Another  recent  example  (that  was  notified  on  a  voluntary  basis)  is  a 
memorandum  of  understanding  between  one  Member  State  and  Qatar  on  LNG  and  LPG 
imports which was in fact a security of supply measure for a whole region covering several 
Member States. 

These  non-legally  binding  commitments  can  however  have  the  same  effect  as  binding 
agreements.  Firstly,  they  may  -  once  implemented  -  give  rise  to  measures  by  the  Member 
States  or  undertakings  that  are  not  compliant  with  EU  law.  Secondly,  non-legally  binding 
instruments can create strong political pressure on the Member State concerned and make it 
difficult for it to deviate from the political commitment.  

The  Commission  considers  that  the  number  of  non-legally  binding  commitments  could 
increase in the future. This is because non-legally binding commitments have the advantage 
that  they  do  not  require  any  parliamentary  scrutiny  or  ratification  and/or  EU  scrutiny.  They 
can therefore be signed in a short period of time and can be more flexible. This makes them 
more attractive compared to legally binding agreements. 

18 

 
 
 
 
 
 
 
3.3.  Subsidiarity and the varying situation of Member States 

Article  4  of  the  Treaty  on  European  Union  (TEU)  requires  Member  States  to  take  all 
appropriate  measures  to  ensure  fulfilment  of  the  obligations  arising  from  the  Treaties  or 
resulting  from  the  Acts  of  Union  Institutions.  Member  States  should  therefore  avoid  or 
eliminate any incompatibility between Union law and international agreements they conclude 
with third countries20. 

It is the EU's aim (under Article 194 TEU) to ensure the functioning of the energy market and 
this requires that energy imported into the Union be fully governed by the rules establishing 
the internal energy market. 

3.3.1.  Necessity of EU action 

An  exchange  of  information21  between  Member  States  and  between  Member  States  and  the 
Commission was therefore deemed necessary and was introduced with Decision 994/2012. 

As  has  however  been  shown  in  the  problem  definition  section  above,  despite  this 
arrangement: 

 

In 17 cases Member states were not able to ensure full compatibility of the content of 
IGAs with EU law, notably with the rules governing the Third Energy package; 

  The  Commission  could  only,  to  a  limited  extent,  fulfil  its  obligation  to  ensure  the 

functioning of the energy market with regard to energy imported into the EU. 

The  need  for  coordination  and  cooperation  at  supranational  level  is  further  reinforced  by 
recent developments in the EU internal energy market, namely the progressive integration of 
energy  infrastructure  and  markets,  the  common  reliance  on  external  suppliers  and  the 
ambition on the part of the EU and Member States to create an Energy Union. 

3.3.2.  EU added-value 

In  terms  of  energy  security,  the  situation  of  Member  States  is  very  diverse.  Europe's  least 
vulnerable areas are those where supplies are available from a substantial number of different 
sources  and/or  through  a  substantial  number  of  different  routes  and  where  there  is  a 
functioning and liquid wholesale market. The most vulnerable areas often suffer from a lack 
of  the  infrastructure  that  is  needed  both  to  enjoy  such  a  diverse  supply  base  and  for  a 
functioning  market  to  develop.  While  liquid  markets  are  found  only  in  a  limited  number  of 
countries,  those  countries  nevertheless  cover  some  80%  of  total  EU  gas  demand.  This 
differentiated  situation  means  that  different  EU  Member  States  have  different  levels  of 
bargaining  power  vis-à-vis  third  countries,  and  different  levels  of  exposure  to  external 
pressure. The table below illustrates this situation: 

20See  also  Article  351  (2)  TFEU  which  requires  Member  States  to  take  all  appropriate  steps  to  eliminate 
incompatibilities between international agreements, that the Member States concluded before their accession to 
the EU, and the EU Treaties. 
21 See details of the provisions of the current IGA decision in annex 2. 

19 

 
 
 
 
 
 
 
                                                 
The  progressive  integration  of  energy  infrastructure  and  markets  and  the  resulting  common 
reliance on external suppliers imply that fundamental political decisions on energy taken by 
one  Member  State  will  have  a  serious  impact  on,  and  therefore  should  be  discussed  with, 
neighbouring countries. The same holds true for the external dimension of EU energy policy. 
The  IGA  Decision  plays  a  crucial  role  in  linking  the  external  dimension  of  energy  policy 
(because  it  relates  to  agreements  with  third  countries)  and  the  internal  dimension  (because 
provisions  in  IGAs  that  are  not  compliant  with  EU  law  have  a  negative  impact  on  the 
resilience and functioning of the internal energy market). 

There  is  therefore  a  clear  added  value  in  ensuring  that  all  provisions  of  the  IGA  Decision 
support improvements  in the exchange of information  and enable the EU to  speak with  one 
voice  and  apply  the  best  available  negotiation  techniques,  as  this  contributes  to  greater 
solidarity and a deeper and fairer economic union. 

20 

 
 
 
 
 
 
 
4.  OBJECTIVES  

4.1.  General objectives 

The review of the IGA Decision takes place in the context of the Energy Union Strategy, the 
objective of which is to give EU consumers - households and businesses - secure, sustainable, 
competitive and affordable energy supplies. 

The changes that the review of the IGA Decision will recommend intend to contribute to the 
general objectives of ensuring the proper functioning of the internal market and increasing the 
energy security of the EU. 

They would also aim, as a consequence, at increasing the solidarity between Member States 
and  increasing  the  ability  of  the  EU  to  speak  with  one  voice  in  negotiations  with  third 
countries. 

These objectives are in line with the following EU Treaty goals: 

  To ensure security of energy supply in the Union (Article 194(1) (b) TFEU). The IGA 

Decision was adopted with Article 194 TFEU as its legal basis; 

  To  establish  a  functioning  internal  energy  market,  in  the  spirit  of  solidarity  between 

the Member States (Article 3(3) TEU; Article 194(1) TFEU). 

4.2.  Specific objectives 

To achieve the above mentioned general objectives, the revision of the IGA Decision has two 
main objectives: 

(1) Increase the compliance of all future IGAs with EU law to ensure the proper functioning 
of the internal market  

(2) Enhance the transparency of IGAs in order to increase the cost effectiveness of the EU's 
energy supply and solidarity between Member States. 

21 

 
 
 
 
 
 
 
5.  POLICY OPTIONS 

With the intention of meeting the objectives set out in the previous section, the Commission 
services have identified a number of different policy options. 

5.1.  Option 1: Baseline scenario 

Under this option, the legal provisions of the current IGA Decision would not be reviewed or 
would  be  limited  to  technical  clarifications  (for  instance,  in  Article  3  of  the  current  IGA 
Decision,  the deadline for the submission of the existing IGAs was 17  February 2013. This 
does not apply anymore and it could be clarified that the current 9 month ex-post assessment 
deadline  for Commission  applies to all  new IGA concluded after the entry into  force of the 
IGA Decision). In parallel to such technical clarifications, the revision of the Security of Gas 
Supply Regulation will consider options to increase the level of transparency for commercial 
gas purchasing contracts attached to IGAs.  

Moreover,  on  the  basis  of  the  existing  text,  the  Commission  could  strengthen  infringement 
efforts against those Member States that are not willing to renegotiate or renounce the IGAs 
that have been found incompatible with EU law. In practical terms, the Commission services 
first  open  a  structured  dialogue  with  the  Member  State  concerned  (an  informal  pre-
infringement  stage).  Should  the  structured  dialogue  prove  insufficient  (e.g.  because 
renegotiations  fail  and  the  Member  State  does  not  denounce  the  IGA),  where  appropriate, 
official infringement procedures could be launched. These proceedings could ultimately result 
in referrals to the European Court of Justice. 

In  the  framework  of  the  Public  Consultation,  opinions  were  divided  on  the  opportunity  to 
remain with  the baseline  situation. A number of the respondents considered that the  current 
IGA Decision offered a balanced and sufficient framework. However, those respondents did 
not recognise the problem identified in section 3.2.4. 

5.2.  Option 2: Improved implementation: model clauses 

The  current  IGA  Decision  (Article  7c)  provides  for  the  development  of  optional  model 
clauses as a guide for Member States concluding IGAs. So far, no such model clauses have 
been developed. As indicated in recital 15 of the current IGA decision, these model clauses 
should have been the result of a "permanent exchange of information on IGAs at Union level, 
which  should  enable  best  practice to  be  developed".  As  explained  in  the  problem  definition 
section,  this  permanent  exchange  has  not  fully  materialised.  Since  the  Commission  has  not 
been informed about any ongoing negotiations, there has also not yet been a reason to develop 
such  clauses.  Furthermore,  developing  such  clauses  is  very  complex  from  a  legal  point  of 
view. The difficulty is to develop model clauses that are both meaningful and whose content 
can be adapted to specific circumstances. 

Different sub-options for model clauses could be assessed in this context: 

  model  clauses  for  energy-related  IGAs  could  take  inspiration  from  model  clauses 

developed in other areas of EU acquis, notably in the aviation sector; 

22 

 
 
 
 
 
 
 
  model clauses could be developed for all possible issues or be limited to only a few 
recurrent  and  specific  issues  such  as  standard  termination  clauses,  which  were 
highlighted as a key factor in the problem definition section; 

  model clauses could be listed in a 'positive' list of clauses exemplifying good practice; 
a  softer  approach  would  be  to  develop  "guidance  notes"  providing  a  non-exhaustive 
'negative' list of non-compliant clauses, abusive clauses or problematic issues. 

  Model  clauses  could  be  made  binding  or  be  offered  for  optional  use  by  Member 

States. 

Depending on the scope and comprehensiveness of policy option 2 it could also complement 
other policy options. 

The great majority of respondents to the Public Consultation were, on this specific point, in 
favour  of  the  provisions  of  the  current  IGA  Decision  offering  the  possibility  of  developing 
optional  model  clauses.  On  the  content  of  such  clauses,  many  respondents  highlighted 
however  the  difficulty  of  developing  clauses  that  would  be  suitable  for  all  energy  related 
IGAs, given that these were often extremely complex and varied. 

5.3.  Option 3: Obligatory ex-ante assessment by the Commission 

Member  States  could  be  obliged  to  inform  the  Commission  at  an  early  stage  of  any  IGA 
negotiations  that  may  start  in  the  future  and  submit  their  draft  new  or  renewed  IGAs  to  the 
Commission  for an  ex-ante control prior  to  their signature or  initialisation.  This  mechanism 
could  for  instance  draw  on  the  verification  mechanism  set  up  by  Article  103  of  the 
EURATOM  Treaty,  which  provides  for  obligatory  submission  of  draft  agreements  and 
contracts to the Commission and a 4 week obligatory ex-ante check prior to final signature of 
agreements concerning matters within the purview of the EURATOM Treaty22. 

A  sub-option  could  be  to  extend  the  scope  of  the  current  IGA  Decision  to  also  cover 
agreements between Member States and third countries which are not legally binding, such as 
memoranda of understanding or other non-binding instruments. As mentioned in the problem 
definition,  current  practice  shows  that  Member  States  enter  into  such  types  of  agreements 
instead of signing legally binding IGAs. Even if legally non-binding, such instruments can be 
used to set out the framework for the construction and operation of pipelines and supply with 
energy commodities. This can be done in a very detailed manner. In this respect non-binding 
instruments  can  be  similar  to  IGAs.  Non-binding  instruments  can  also  contain  provisions 
which – once legally implemented by the Member States or commercial entity – could result 
in  a  violation  of  EU  law.   In  order  to  avoid  such  effects,  a  number  of  sub-options  could  be 
envisaged: 

  One  possibility  could  be  to  extent  the  scope  of  the  revised  IGA  Decision  to  include 
also  non-binding 
the 
Commissions.  This  approach  would  avoid  that  Member  State  bypass  the  mandatory 
ex-ante assessment for IGAs by instead entering into non-binding instruments. 

instruments  for  a  mandatory  ex-ante  assessment  by 

22  "Member  States  shall  communicate  to  the  Commission  draft  agreements  or  contracts  with  a  third  State,  an 
international organisation or a national of a third State to the extent that such agreements or contracts concern 
matters  within  the  purview  of  this  Treaty.  If  a  draft  agreement  or  contract  contains  clauses  which  impede  the 
application of this Treaty, the Commission shall, within one month of receipt of such communication, make its 
comments known to the State concerned. (…)" 

23 

 
 
 
 
 
 
                                                 
  Another possibility could be to establish the obligation for Member States to notify a 
non-binding  instrument  only  once  it  was  agreed  with  the  third  country,  and  the 
Commission  could  be  entitled  to  raise  its  concerns  as  regards  the  implementation  of 
the  instrument,  where  appropriate.  Under  both  options,  however,  the  definition  of 
"non-legally binding instruments" would need to be restricted by a non-exhaustive list 
of criteria in the revised IGA Decision. These criteria would help to capture only those 
"non-legally  binding  instruments"  that;  inter  alia,  have  an  impact  on  the  internal 
energy  market,  or  contain  interpretation  of  EU  law  or  set  the  conditions  for  the 
development of energy infrastructures or energy commodities supply. 

In  the  framework  of  the  Public  Consultation,  opinions  on  the  need  to  introduce  an  ex-ante 
verification mechanism mirrored those on the need to strengthen the IGA Decision, with those 
in favour of strengthening the IGA Decision generally believing that the introduction of an ex-
ante verification mechanism should be the main vehicle for that reinforcement and those who 
felt that the current IGA Decision was sufficient generally opposing such a mechanism. 

5.4.  Option 4: Obligatory participation of the Commission in negotiations 

In addition to formally notifying the Commission ex-ante of their IGAs and in any ongoing or 
future  IGA  negotiations,  Member  States  could  be  required  to  invite  the  Commission  as  an 
observer to the negotiations. This would reinforce the current provisions under which Member 
States solely "may request the assistance of the Commission". This option would imply that 
Member  States  inform  the  Commission  of  any  ongoing  or  future  IGA  negotiations,  or 
scheduled  decisive  meetings  with  third  countries  and  submit  draft  agreements  to  the 
Commission for review prior to such meetings taking place. 

It would be at the discretion of the European Commission to decide on a case-by-case basis 
whether written comments prior to the meetings with third parties were sufficient or whether 
the  participation  of  a  Commission  representative  in  the  negotiation  meetings  would  provide 
added  value  e.g.  when  the  outcome  of  a  negotiation  is  expected  to  have  significant 
implications  for  other  Member  States.  It  would  however  be  difficult  for  the  European 
Commission to participate in all negotiation meetings, for obvious reasons relating to resource 
constraints. 

A  large  majority  of  the  respondents  to  the  Public  Consultation  were  opposed  to  mandatory 
assistance  from  the  Commission  in  the  negotiation  of  IGAs.  Respondents  opposed  to 
including  an  ex-ante  verification  mechanism  stressed  the  competence  issue  and  underlined 
that the existing system, which allowed the assistance of the Commission on a voluntary basis 
at the request of the Member States, was a good tool. Those in favour of a mandatory ex-ante 
mechanism suggested that it would make the mandatory participation of the Commission in 
negotiations less necessary. 

24 

 
 
 
 
 
 
5.5.  Option 5: Commission to negotiate EU agreements in the field of energy 

The  EU  could  exercise  its  external  competence  in  the  field  of  energy  by  signing  EU-level 
agreements with third countries, rather than leaving that to individual Member States. Under 
this option, Member States and the Commission could discuss in advance, in the appropriate 
fora, whether an EU-level agreement (exclusive or mixed) is more appropriate and effective 
than a national bilateral agreement with a third country. In case of an EU-level agreement, the 
national  negotiation  and  drafting  process  would  be  replaced  by  a  process  in  which  the  EU 
took  the  lead  the  negotiations  on  the  basis  of  negotiating  Directives,  and  in  which  national 
representatives were regularly informed about the progress of these negotiations. 

This option would be consistent with the recent case-law of the ECJ, according to which, in 
principle, the Commission should intervene if an IGA is in breach of the exclusive external 
competence of the EU. Such exclusive competence arises whenever an IGA touches on issues 
for which EU-rules exist (tariffs for transmission lines for instance)23. 

No  respondents  to  the  Public  Consultation  explicitly  mentioned  the  opportunity  for  EU 
agreements to replace bilateral energy related IGAs. 

23 See ECJ, Case C-66/13, Green Network, judgement of 26 November 2014. 

25 

 
 
 
 
 
 
                                                 
6.  ASSESSMENT OF THE IMPACTS OF THE VARIOUS POLICY OPTIONS 

This Impact Assessment performs a proportionate assessment of the likely impacts of the five 
identified options, and relies mainly on a qualitative description and evaluation. This is due to 
the fact that it is not always possible to quantify the direct and indirect macroeconomic effects 
of changes to the IGA Decision (such as capital costs, labour costs, costs of energy supplies 
etc.). For this reason, this Impact Assessment does not use supporting modelling techniques. 
The Impact Assessment study draws on policy experience from the aviation sector for policy 
option  2  (model  clauses)  and  from  the  area  of  nuclear  international  agreements  for  policy 
option 3. It seeks as far as possible to quantify administrative costs occurring within national 
and EU administrations. 

For  the  purposes  of  this  qualitative  assessment  the  following  impacts  are  deemed  the  most 
relevant and are therefore the ones that will be assessed in this chapter: 

Economic impacts 

This  section  addresses  notably  administrative  costs  occurring  within  national  competent 
authorities  and/or  the  Commission  as  these  are  the  main  direct  and  quantifiable  outcome  of 
any change to the IGA Decision. 

Indirect economic effects are mainly due to changes in investment security and the associated 
(financial) risk. This is particularly true for infrastructure-related IGAs that provide legal and 
regulatory certainty. The biggest single cost factor would probably be the cost occurring to the 
competent authorities of a Member State and project promoters as a result of the suspension, 
after  signature  and/or  commencement  of  related  works,  of  an  IGA  that  was  deemed 
incompatible  with  EU  law.  The  Member  State  in  question  would  face  the  cost  of 
compensation payments and/or penalties paid to third country government and private entities 
that had planned and possibly already invested in a project based upon the fact that an IGA 
had  been  concluded.  Project  promoters  in  the  private  sector  (large  companies  and  their 
subcontractors which can be SMEs) would have to bear the sunk costs of the related cancelled 
project, or potentially the costs of litigation. It could furthermore be expected that, after the 
cancellation of an important IGA, risk premiums for subsequent projects would go up. There 
would  however  be  indirect  positive  economic  effects  resulting  from  increased  transparency 
and  the  capacity  of  vulnerable  Member  States  to  better  negotiate  with  third  countries.  The 
proposed options would also indirectly increase the security of supply for all Member States 
to the extent that: 

 

the  more  vulnerable  Member  States  will  gain  more  bargaining  power  as  a  result  of 
information being shared better and/or the Commission being increasingly involved in 
the drafting of IGAs and/or the meetings themselves; 

  all  Member  States  ultimately  gained  from  an  increase  in  transparency  around  IGAs 
and from being in more of a position to have full oversight of investments (and hence 
avoid expensive duplication of security of supply projects), particularly in a situation 
where the third country concerned already possesses all of this information. 

Finally the policy options listed above will, to various extents, improve the proper functioning 
and  resilience  of  the  internal  energy  market  and  the  degree  of  competition  in  the  energy 
sector,  because  they  will  result  in  a  reduction  in  the  number  of  legally-problematic  IGA 
provisions. This will be described in more detail, in qualitative terms, below. 

26 

 
 
 
Environmental and social impacts 

This  section  will  not  assess  in  detail  the  environmental  and  social  impacts  of  the  different 
options. The direct impact of the various proposed changes to the current Decision are mostly 
economic in  nature, such as  improved compliance  and transparency  of IGAs and ultimately 
improved  security  of  supply.  Thus  the  proposed  policy  options  could  only  have  indirect 
impacts on the environment and social issues, on the basis that any such impacts would be the 
consequence  of  decisions  by  stakeholders'  (i.e.  competent  authorities,  energy  undertakings 
etc.) on the specific measures they would take. The expected environmental impact of each of 
the proposed options should not therefore be more negative than the impact of the operation 
of  the  current  system,  established  by  the  IGA  Decision  in  2012.  On  the  contrary,  their 
potential  indirect  impact  on  the  environment  could  be  positive,  if  efforts  to  improve 
compliance of IGAs with EU law create a better business environment where environmental 
or labour issues are given more attention. 

The same  logic  will apply  to the impacts of the various options  on  employment and SMEs. 
None  of  the  proposed  options  would  add  any  direct  impacts  to  the  ones  incurred  by  the 
current  systems  as  regards  employment.  The  proposed  options  would  also  entail  no  direct 
additional  burden  for  SMEs  as  their  implementation  would  essentially  involve  national 
authorities. However indirect impacts on the overall business environment could be foreseen 
and are analysed in this section as far as possible. 

6.1. 

Impacts of option 1: baseline scenario 

As  described  in  the  problem  definition  section,  infringement  procedures  have  not  yet  been 
systematically launched against Member States who are in breach of EU law in the context of 
an IGA. Keeping the current IGA Decision unchanged and launching infringement procedures 
against  non-compliant  IGAs  could  give  a  strong  signal  as  regards  planned  and  future 
agreements,  and  hence  improve  overall  compliance  of  IGAs  with  EU  law  and  the 
effectiveness  of  the  Decision  in  the  medium  to  long  term.  However,  by  the  time  any 
infringement  process  has  come  to  a  conclusion,  something  which  could  take  up  to  several 
years, the related energy project might already have been cancelled – or indeed be very well 
advanced or completed. Investor's security will not be improved until the final judgement is 
available.  This  legal  uncertainty  would  then  also  indirectly  affect  other  Member  States  and 
business  in  general,  as  risk  premiums  associated  with  large  cross-border  infrastructure 
projects would increase. 

This option could come with a high cost for authorities responsible for non-compliant IGAs 
that were suspended, as such authorities would have to pay fees both in the EU context and 
face  international  arbitration  with  all  risks  and  costs  involved  if  third  parties  refused  to 
terminate or amend the IGAs concerned. 

Such an approach could also incentivise Member States to instead make use of "non-legally 
binding instruments", which would fall outside the scope of the current IGA Decision. Such 
instruments  would  probably  ultimately  increase  legal  uncertainty  rather  than  decrease  it,  as 
there would not only be the general uncertainty around these agreements and the underlying 
contracts, but also the additional uncertainty as to what extent the Commission could ex-post 
address any problematic issues. 

27 

 
 
 
 
6.2. 

Impacts of option 2: model clauses 

Overall,  the  Commission's  assessment  is  that  the  disadvantages  of  developing  mandatory 
model  clauses  would  outweigh  their  potential  positive  effect.  This  is  mainly  due  to  the  fact 
that model clauses are useful when applied to a specific type of issues. The scope of the IGA 
Decision however covers a large variety of different situations. 

The positive effects could be the following: 

 

In  general,  model  clauses  could  help  some  Member  States  in  terms  of  negotiating 
experience and in terms of bargaining power in negotiation with suppliers from third 
countries.  Moreover,  the  process  of  drafting  those  model  clauses  could  increase  the 
level  of  dialogue  between  Member  States,  and  between  Member  States  and  the 
Commission,  indirectly  having  a  positive  effect  on  the  level  of  awareness  within 
national  authorities  of  potential  conflicts  with  EU  law.  The  development  of  such 
model clauses would also be fully transparent.  

  Such consequences have been seen following the development of standard clauses in 
other  areas  of  the  EU  acquis,  notably  in  the  aviation  sector.  In  November  2002,  the 
European  Court  of  Justice  found  that,  if  an Air  Services Agreement  (ASA)  permits 
designation only of companies owned and controlled by nationals of the signatory EU 
Member  State,  such  discrimination  is  in  breach  of  EU  law.  As  a  result,  every  EU 
Member  State  was  required  to  grant  equal  market  access  for  routes  to  destinations 
outside the EU to any EU carrier with an establishment on its territory. ASAs between 
EU Member States and their bilateral partner States had to be amended to reflect this 
position.  The  model  clauses  developed  to  bring  ASAs  into  line  with  EU  law  were 
therefore very specific and concerned for instance: designation of companies, safety or 
the taxation of aviation fuel. 

However,  developing  mandatory  model  clauses  for  energy  related  IGAs  would  prove  less 
efficient  in  the  energy  sector,  mainly  because  energy-related  IGAs  frequently  cover  a  wide 
variety of situations, from the delivery of energy commodities to transit agreements or cross-
border  infrastructure  development  projects.  Such  IGAs  also  differ  substantially  from  one 
another  as  regards  their  magnitude  and  degree  of  complexity,  with  some  IGAs  only 
addressing fuel supply and/or infrastructure and others combining both aspects. Legal issues 
arising could therefore potentially be more varied than is the case with ASA model clauses. 
This  complexity  would  be  increased  by  the  fact  that  draft  IGAs  frequently  involve  several 
tiers of documents (such as general agreements, specific commercial contracts and technical 
specifications)  –  documents  which  might,  depending  on  the  case,  be  linked  to  financial 
arrangements.  

For these reasons, an ASA-type approach in the area of energy-related IGAs would need to 
address a significantly higher number of issues, risks and legal and political complexities – or 
alternatively  might  be  used  only  partially  for  specific  recurrent  problematic  issues    and 
possibly be complemented by other policy options. 

In  a  nutshell,  the  wide  range  of  situations  and  business  models  under  the  scope  of  the  IGA 
Decision will not allow for clauses to be developed that are precise enough to substitute for an 
in-depth ex-ante assessment of a final draft text. 

28 

 
 
 
 
 
 
 
This  does  not  mean  that  a  list  of  clauses  reflecting  either  best  practices  (model  clauses)  or 
abusive clauses (blacklist) would not be useful for Member States when negotiating with third 
countries. Such clauses could help Member States to avoid an incompatibility with EU law. 
Different  sub-options  for  model  clauses  could  be  assessed  in  that  context,  as  described  in 
section 5.2. In this context, careful consideration would be needed in particular as regards: 

 

 

the administrative costs related to the preparation of model clauses. Their preparation 
and  development  would  involve  a  significant  number  of  experts  at  both  EU  and 
national level for a relatively long period of time. Legal experts of large multinational 
and  specialised  smaller  companies  involved  in  energy  development  projects  would 
possibly also need to be consulted at various points throughout the process; 
the  legal  effect  of  such  clauses,  acknowledging  a  priori  that  the  degree  of  legal 
certainty provided by model clauses will in any case never be total and that total legal 
certainty  will  not  be  available  until  the  Commission  has  had  the  opportunity  to 
perform a full compliance check on the basis of a draft final text. 

6.3. 

Impacts of option 3: obligatory ex-ante assessment by the Commission 

A compulsory ex-ante compatibility check as described above would address the main issue 
identified  in  the  problem  description  section,  i.e.  that  the  current  IGA  Decision  does  not 
ensure compliance of future or renewed IGAs with EU law. Existing IGAs would be made 
compliant  once  they  are  opened  up  for  renewal/renegotiation.  As  mentioned  above,  the 
economic benefits that would result from increased compliance of IGAs with EU law would 
be related to: 

 

increased  legal  certainty,  which  favors  investment.  This  is  particularly  true  for 
infrastructure-related IGAs that are intended to provide legal and regulatory certainty 
for  projects  involving  high  levels  of  investment.  This  increased  legal  certainty  is 
transit 
important  where 
particularly 
agreement/infrastructure project; 

several  bilateral 

cover  one 

IGAs 

  a well-functioning internal energy market, without segmentation at national level and 

 

with increased competition; 
increased transparency as regards the security of supply situation in all Member States, 
which in turn can avoid double investments and/or infrastructure gaps; 

The benefits of increased legal certainty would be felt not only by the competent authorities in 
Member  States  that  would  no  longer  face  the  risk  of  the  non-compliance  of  IGAs  with  EU 
law,  but  also  by  private  energy  and  infrastructure  companies,  project  managers  and  private 
and  public  banks  involved  in  developing  transit  routes  and  infrastructure  projects.  The 
promoters of EU law compliant projects would benefit from these effects in terms of reduced 
legal  and  economic  risks  as  issues  would  be  tackled  at  an  early  stage  and  in  a  transparent 
manner; this would also have a positive impact on investment costs. Positive economic effects 
in terms of employment, provision of services and local economic activities could be spread 
further  as  the  project  moves  from  the  planning  phase  to  final  investment  decision  and  as 
subcontractors  (including  SMEs)  are  associated  to  the  specific  tasks  related  to  the 
construction works of the project. 

This option would also meet the second objective of the IGA Decision review, i.e. to increase 
transparency, especially if Member States would be obliged to notify, at an early stage, IGA 
negotiations  that  are  foreseen  to  start  in  the  future.  For  cross-border  projects,  this  option 

29 

 
 
 
 
 
 
would  also  give  to  all  Member  States  concerned  the  same  level  of  information  as  the  third 
country on the specificities of the entire project. 

This  option  could  however  entail  indirect  costs.  For  companies,  even  though  commercial 
contracts will stay out of the scope of the IGA decision, a mandatory ex-ante control of IGAs 
could  delay  the  conclusion  of  the  related  commercial  contracts.  This  would  increase  the 
upstream phase of investments projects while improving legal certainty over the long run. For 
the Commission  and  Member States, it would also entail additional administrative costs.  At 
the EU level, the first level of ex-ante assessment for each new or renewed IGA submitted to 
the  Commission  would probably  involve  two legal  officers  in  DG  ENER  for  up  to  two  full 
working days (provided that the officials in question could cover all legal issues at stake and 
would not have to consult more widely). The Commission's Legal Service and other relevant 
DGs would also need to be consulted, and would also need to invest the time of one to two 
legal officers for an estimated one to two days. At a national level, the main legal assessment 
and  drafting  work  necessary  to  conclude  an  IGA  with  a  third  country  would  be  carried  out 
whether or not there was an obligatory notification provision. Therefore the additional cost of 
this option at a national level would be linked to the submission of documents for the ex-ante 
scrutiny  to  the  European  Commission.  If  fundamental  and  problematic  issues  with  the  draft 
new or renewed IGAs were detected, more legal experts would need to be consulted. Several 
rounds of consultation with national authorities might be necessary, which would also imply 
that more legal officers at all hierarchical levels in the national administration would need to 
devote additional hours to the issue during the pre-signature phase. The experience of nuclear-
related  IGAs  shows  that  the  4  week  scrutiny  period  granted  to  the  European  Commission 
would  be  extremely  challenging  in  the  event  of  serious  doubts  being  raised  as  to  the 
compatibility  of  an  energy  related  IGA  with  EU  law  as,  following  legal  scrutiny,  the 
procedures  required  (in  particular  the  need  to  organise  a  consultation  of  all  relevant 
Commission services and to adopt a Commission Decision) would take time. Moreover, the 
number  of  problematic  IGAs  in  the  nuclear  area  has  been  lower  than  was  the  case  with 
energy-related  non-nuclear  IGAs.  Based  on  the  Euratom  Article  103  experience  and  the 
complexity of energy-related IGAs, the screening period considered reasonable should be at 
least 6 weeks as regards the deadline for informing Member States about any doubts and 12 
weeks as regards the deadline for issuing an opinion. This would hence prolong the planning 
phase of related projects. 

The Commission assessment is that, overall, the benefits of this option would be higher than 
its costs as a relatively moderate additional task for national authorities (notification of drafts 
that are anyhow being negotiated and drafted) can ensure that any future or renegotiated IGA 
will be fully compliant with EU law and no longer pose a regulatory risk for investors. At the 
same time, the degree of transparency with regard to planned and future reliance on external 
fuel supply by all Member States increases and will allow everyone to optimise their national 
security of supply and preparedness policies. The Commission can – once it is informed ex-
ante - also ensure that the cross-border effects on other Member States are considered, thus 
ultimately increasing the EUs overall security of energy supply. 

Moreover,  limiting  the  scope  of  application  of  option  3  or  complementary  measures  could 
help  mitigate  the  associated  additional  administrative  costs.  For  instance,  as  the  problem 
definition section has shown that a large majority of the notified IGAs cover non-problematic 
general bilateral energy cooperation agreements, it could be decided that the proposed ex-ante 
mechanism  should  only  capture  those  IGAs  covering  energy  infrastructure  or  the  supply  of 
commodities.  Following  the  same  approach,  if  the  revised  IGA  Decision  were  to  capture 
"non-legally  binding  instruments",  one  sub-option  could  be  to  restrict the  definition of  such 

30 

 
 
 
 
"non-legally  binding  instruments"  on  the  basis  of  a  non-exhaustive  list  of  criteria.  Such 
criteria  could  narrow  down  the  scope  to  those  "non-legally  binding  instruments"  that;  inter 
alia, had an impact on the internal energy market, or contained interpretation of EU law or set 
conditions on the development of energy infrastructure or energy commodity supply. 

6.4. 

Impacts  of  option  4:  obligatory  participation  of  the  Commission  in 
negotiations 

Member States could be obliged to invite the Commission as an observer in the negotiation of 
new or renewed IGAs (the current IGA Decision states that Member States "may request the 
assistance of the Commission"). In practice this option would probably be chosen as an add 
on  to  a  mandatory  ex-ante  notification  as  Commission  involvement  would  only  be  fully 
beneficial if the Commission possesses a maximum amount of information prior to a meeting. 
However,  it  could  be  possible  to  consider  combining  model  clauses  with  Commission 
participation. 

The assessment of this option is complicated by the fact that, to date, the Commission has not 
been invited to any ongoing negotiations. It is hence difficult to provide an estimation as to 
what extent the involvement of the Commission could result in a more homogenous outcome 
for all Member States. 

Commission participation in IGA negotiations could possibly help to avoid the development 
of potentially non-compliant provisions to an even larger extent than in the previous option, as 
the Commission would be much more involved and hence also much more aware of potential 
conflicts.  Also,  having  the  Commission  at  the  table  would  ensure  that  Member  States  with 
weaker  bargaining  power  gain  weight  and  that  the  EU  as  a  whole  increasingly  speaks  with 
one voice. Option 4 (as does option 3) would continuously streamline the positions taken in 
they  are 
future  energy  non-nuclear  IGAs  (existing  ones  only 
reopened/renegotiated) and could avoid  costly parallel infrastructure planning or  suboptimal 
decisions  as  the  Commission  can  take  on  a  strong  role  in  ensuring  the  coherence  and 
consistency of IGAs. 

the  extent 

that 

to 

On the other hand it would also oblige Member States that do not necessarily need the EU as 
an  observer  to  involve  a  third  party  in  the  negotiations  (therefore  adding  also  for  them  the 
administrative  costs  related  to  coordinating  between  the  EU  and  the  national  level).  The 
economic  and  administrative  costs  related  to  drafting  and  negotiation  with  the  national 
authorities are similar to the ones observed under option 3, but the administrative costs for the 
Commission  will  increase  as  this  would  entail  costs  of  participating  in  those  meetings.  The 
Commission services might however not have sufficient resources and time to participate in 
all  negotiation  phases  for  all  potential  IGAs,  nor  might  they  have  access  to  all  related 
commercial contracts and therefore be able to develop a proper compatibility assessment. 

Moreover, this option could also create the impression that the Commission fully agreed with 
an  IGA  if  it  made  no  objections  during  the  negotiation  phase,  even  if  it  participated  only 
partially  in  these  negotiations.  This  could  make  it  more  difficult  for  the  Commission  to 
challenge  the  IGA  at  a  later  stage,  when  issuing  its  ex-post  (or  ex-ante)  opinion  or  during 
Court proceedings. 

31 

 
 
 
 
 
 
 
 
 
 
6.5. 

Impacts  of  option  5:  Commission  to  negotiate  EU  agreements  in  the  field  of 
energy 

Under this option, bilateral national agreements would be replaced by an EU-level agreement 
(exclusive or mixed) and negotiations be led by the EU on the basis of negotiating Directives. 
It  would  also  be  the  EU  that  signs  these  agreements  with  third  countries.  In  practice,  this 
option would also require ex-ante information on all ongoing and upcoming IGA negotiations 
(option  3).    The  EU  and  the  Member  States  would  probably  need  to  establish  a  permanent 
dialogue  at  a  technical  level  in  order  to  identify  the  most  significant  upcoming  IGAs  (or 
review of existing IGAs) with a cross border dimension as well as the best way to deal with 
them  (exclusively  at  EU  level/mixed  competence).  Where  appropriate,  the  national 
negotiation and drafting process would then be replaced by a process in which the EU would 
lead  in  the  drafting  and  in  the  negotiations  and  where  national  representatives  would  be 
regularly informed on progress. Already this screening exercise would add additional weeks 
to the current duration of IGA negotiations. 

This option implies a shift of most of the costs associated with the negotiations (costs for the 
involved  policy  and  legal  officers,  travelling  costs  for  missions  etc.)  from  the  national 
administration  to  the  Commission.  This  shift  would  however  not  leave  the  national 
administration without any costs, as the latter would still need some officials for monitoring 
the  process  at  EU  level  (including  possibly  travelling  costs  for  coordination  meetings  in 
Brussels).  The  EU-level  would  face  additional  administrative  costs  as  it  would  need  to 
continuously liaise with the concerned national authorities, debrief them regularly and ensure 
consistency  between  various  IGAs.  To  the  extent  that  this  option  would  prolong  the 
negotiation process,  and  therefore  by  implication  the  project  lead  times,  it  might  also  entail 
indirect costs on private operators. 

In terms of benefits, the entirety of future IGAs can be assumed to be in compliance with EU 
provisions and security of supply considerations. EU agreements could provide for a uniform 
legal  framework  covering  all  energy  infrastructure  projects  and  providing  for  maximum 
investment security across the EU. From the perspective of investors and project promoters, it 
would also improve transaction costs and streamline project financing as the same rules would 
be  applied  to  all  types  of  energy  infrastructure  and  across  all  Member  States.  This  option 
would also allow for a global and consistent approach in favour of security of supply and the 
completion  of  the  internal  market.  In  addition,  EU-agreements  could  ensure  that  full  use  is 
made  of  the  bargaining  power  of  the  EU  in  the  case  of  agreements  related  to  energy 
commodity  supply  –  even  though  it  cannot  be  said  for  sure  that  the  EU  stepping  in  for 
Member States with a weaker bargaining power would always achieve outcomes equivalent to 
the ones for stronger Member States. 

This option would however result in a major shift in competences from the national to the EU 
level.  At  his  stage  this  option  seems  disproportionate  as  compliance  with  EU  rules  and 
strengthening of the EU's overall bargaining  power  does  not  require completely taking  over 
the negotiations and could be better achieved by the previous options. 

32 

 
 
 
 
 
 
 
 
 
7.  COMPARISON OF THE OPTIONS 

To compare the options and define the preferred one, a table has been developed using as the 
main  criteria  the  options'  effectiveness,  their  efficiency,  the  level  of  administrative  burden 
they  incur  and  their  proportionality.  In  this  table,  each  option  is  compared  with  option  1, 
which is the baseline scenario. The level of effectiveness depends on two main factors which 
correspond to the two main objectives of the review of the IGA Decision: the increased level 
of  compliance  of  IGAs  with  EU  law  and  the  increased  level  of  transparency  /  solidarity 
between Member States. Note that, when screening and comparing the options, three pluses 
indicates  a  major  improvement  when  compared  to  the  baseline,  two  pluses  a  substantial  
improvement and one plus indicates an improvement, zero indicates no change and the minus 
signs indicate deterioration. 

Criteria  
--------- 
Options  

Effectiveness 

Efficiency  

Administrative Burden 

Proportionality  

Coherence  

Compliance 

Transparency 

Costs 

Benefits 

on Member 
States 

On 
Commission 

Option 1 

Baseline 
Option 2   

Model 
clauses 

Option 3  

Obligatory 
ex-ante 
assessment 
Option 4 

Mandatory 
Commission 
participation 
in IGA 
Negotiations 

Option 5 

Commission 
negotiating 
EU 
agreements 

0 

+-++ 
(depending 
on the scope 
of application 
and their 
legal effect) 
+++ 
(for future 
and renewed 
IGAs) 

++ 
(for future 
and renewed 
IGAs, 
assuming that 
Commission 
cannot 
participate in 
all 
negotiations) 
+++ 
(for future 
and renewed 
IGAs) 

0 

0 

0 

0 

0 

0 

- to --
(depending 
on the scope 
of 
application) 

+ to ++ 
(depending on 
the scope of 
application) 

- to – 
(depending on 
the scope of 
application) 

- to – 
(depending on the 
scope of 
application) 

0 

++++ 

0 

+ 

+++ 
(for both 
Commission 
and other MS)  

-- to - 
(depending 
on scope of 
application) 

+++ 

++ (for 
Commission) 0 
for Member 
States  

- 

++ (but only 
for a certain 
group of MS 
with current 
weaker 
bargaining 
position) 

- 

+++ 

+++ 
(for both 
Commission 
and other MS)  

- 

- 

- 

-- 

-- 

+++ 

++ 

++ 

0 

--- 

-- 

- 

33 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As  the  table  shows,  the  approach  based  on  model  clauses  (option  2)  demonstrates  a  wide 
range of possible positive results, as the effectiveness of this option will depend on the extent 
to  which  it  can  become  both  meaningful  and  applicable  in  a  wide  range  of  agreements. 
Developing a few standard clauses for the most frequently encountered problematic issues in 
IGAs  such  as  the  absence  or  suboptimal  drafting  of  renegotiation  and  termination  clauses 
could  possibly  provide  important  benefits  in  terms  of  compliance  for  future  IGAs  with 
relatively little mostly administrative cost. In such a case, model clauses do possibly not even 
have to be of binding nature in order to deliver these effects. However, if the ambition is to 
prepare model clauses for all possible foreseeable contract terms and situations, then the cost 
benefit  analysis  might  even  turn  negative.  A  partial  application  of  option  2  could  also  be 
combined  with  other  policy  options  such  as  option  3  or  option  4.  Option  2  will  not 
substantially improve transparency on the activities of Member States related to IGAs though, 
as neither the Commission, nor EU Member States will receive more information than under 
the baseline scenario about ongoing or future negotiations with third countries. 

Option  3  provides  the  best  cost  effectiveness  outcome  with  relatively  minor  additional 
administrative costs occurring for Member States and the Commission, and can guarantee that 
any future or renegotiated IGA is respecting EU provisions in the area of internal market and 
competition  law.  A  positive  side  effect  is  the  increased  transparency  that  both  the 
Commission  and  Member  States  would  benefit  from.  Option  3  scores  best  for  policy 
coherence as it would align non-nuclear and nuclear IGA notifications and it would possibly 
also complement the policy options for increased transparency that are being considered  in 
the context of the review of the Gas Security of Supply Regulation.  Finally from a political 
point of view, this option corresponds most closely to the Commission's proposal from 2011. 
At  that  time,  a  clear  majority  of  Member  States  were  unwilling  to  support  such  an  ex-ante 
control mechanism. Since then, the political context has changed, including through the strong 
political  momentum  generated  by  the  adoption  in  May  2015  of  the  Energy  Union  Strategy. 
The  sudden  cancellation  of  the  South  Stream  project  may  also  have  changed  perspectives. 
This option could also be expected to receive the support of the European Parliament. For all 
these  reasons,  option  3  comes  out  of  this  assessment  as  the  most  effective  and 
appropriate  choice,  either  as  a  stand-alone  option  or  in  combination  with  a  limited 
application  of  option  2  (optional  model  clauses).  Option  3  would  also  correspond  to  the 
opinion expressed in the Public Consultation by those in favour of reinforcing the current IGA 
Decision. 

Option 4 could improve compliance and transparency, although not to the extent that option 3 
would. Its main disadvantage is that the benefits and costs would fall differently on different 
Member States, with those Member States currently with a weaker bargaining power gaining 
and  those  Member  States  who  do  not  require  the  Commission  as  participant  in  the 
negotiations paying an additional cost for no obvious benefit. 

Option  5  delivers  the  same  benefits  as  option  3  but  with  significantly  higher  costs.  There 
would be a disproportionate level of intervention, with national level drafting and negotiations 
being replaced by EU level drafting and negotiations for the cases having the most significant 
cross border effects. This would imply inter alia that the Commission would sign agreements 
which  would  have  substantial  effects  on  national  energy  security  of  supply  and 
infrastructures. 

34 

 
 
 
 
 
 
 
 
8.  MONITORING AND EVALUATION 

In  order  to  assess  whether  the  revised  IGA  Decision  has  achieved  its  objectives,  the 
Commission  will  monitor  the  compliance  of  notified  IGAs  as  part  of  its  general  work  on 
enforcement. The main performance indicator will be the share of non-compliant IGAs out of 
the total number of notified IGAs (separated into existing and future ones). 

Moreover,  the  IGA  Decision  contains  a  review  clause  in  Article  8.  This  article  requires  the 
Commission  to  prepare  a  report  by  1st  January  2016  and  every  three  years  thereafter.  This 
report shall in particular assess: 

 

 
 

the extent to which this Decision promotes compliance of IGAs with European Union 
law and a high level of coordination between Member States with regard to IGAs; 
the impact this Decision has on Member States' negotiations with third countries; 
the  extent  to  which  the  scope  of  this  Decision  and  the  procedures  it  lays  down  are 
appropriate. 

In addition to the evaluation report in annex to this Impact Assessment, a first report to the 
European Parliament and to the Council will accompany the proposal for a review of the IGA 
decision. 

For  the  future,  the  Commission  intends  to  produce,  as  requested  in  article  8  of  the  IGA 
Decision,  a  subsequent  report  by  1.  January  2020,  keeping  the  same  criteria  as  described 
above,  which  are  of  sufficiently  broad  nature  to  capture  the  potential  evolution  of  the 
implementation of the IGA Decision. 

Finally, the Commission, in its role as guardian of the Treaties, will pursue when necessary 
the procedure set out in Article 258 of the Treaty in the event any Member State fail to respect 
its duties concerning the implementation and application of Union Law. 

35 

 
 
 
 
 
 
ANNEX  1:  EVALUATION  REPORT  ON  THE  APPLICATION  OF  THE  CURRENT  IGA 
DECISION 

Introduction 

Negotiations  with  energy  suppliers  in  third  countries  frequently  require  political  and  legal 
support  in  the  form  of  the  conclusion  of  intergovernmental  agreements  (IGAs).  IGAs  are 
normally negotiated bilaterally and are often the basis for more detailed commercial contracts. 
Different categories of IGAs can be distinguished: 

 

 

 

IGAs  used  to  provide  legal  certainty  for  the  construction  of  import  and  export 
infrastructure,  most  notably  cross-border  oil,  gas  and  electricity  infrastructure, 
including LNG facilities; 
IGAs relating to  the purchase, or  to the facilitation  of the purchase, of a commodity 
such as oil or gas; 
IGAs  of  a  general  nature  establishing  a  framework  for  bilateral  energy  cooperation 
between  Member  States  and  third  parties,  either  in  general or  in  a  specific  field  (for 
instance  IGAs  that  set  a  framework  for  the  exchange  of  expertise  in  the  field  of 
renewable energy). 

Since the liberalisation of the EU electricity and gas markets, particularly through the Second 
and  Third  Energy  Packages,  Member  States  have  introduced  significant  requirements  into 
their energy legislation. Compliance with these requirements is not always in the commercial 
interest  of  third  country  energy  suppliers  and  Member  States  can  therefore  come  under 
pressure  to  include  regulatory  concessions  in  their  IGAs  with  third  countries.  Such 
concessions  can  threaten  the  smooth  operation  and  proper  functioning  of  the  EU  internal 
energy market. 

To address this challenge, the European Council on 4 February 2011 concluded that there was 
a need for better coordination of EU and Member States' activities, with a view to ensuring 
consistency  in  the  EU’s  external  energy  relations  with  key  producer,  transit,  and  consumer 
countries.  The  Council  therefore  invited  Member  States  to  inform  the  Commission,  from  1 
January  2012  onwards,  of  all  their  new  and  existing  bilateral  energy  agreements  with  third 
countries.24 

Decision 994/2012/EU of 25 October 2012 (the IGA Decision) translated the Conclusions of 
the  European  Council  into  a  mechanism  for  the  exchange  of  information  between  Member 
States  and  the  Commission  on  IGAs.  The  IGA  Decision  defines  IGAs  as  "legally  binding 
agreements between one or more MS and one or more third countries having an impact on the 
operation or the functioning of the internal energy market or on the security of supply in the 
Union". The IGA Decision thus applies to all types of energy commodities related supply and 
infrastructures  IGAs,  in  particular  gas,  oil  and  electricity.  Only  IGAs  concerning  matters 
within  the  purview  of  the  Euratom  Treaty  are  excluded.  For  these  IGAs,  Article  103  of 
Euratom provides for a specific ex-ante procedure.  

24 This conclusion was confirmed by the Energy Council of 28th February 2011: "Improved and timely exchange 
of  information  between  the  Commission  and  Member  States  including  Member  States  information  to 
Commission on their new and existing bilateral energy agreements with third countries".  

36 

 
 
 
 
 
 
 
 
                                                 
The objectives of the IGA Decision are: 

 

 

to improve the exchange of information between Member States and between Member 
States and the Commission on existing and planned IGAs, to facilitate coordination at 
EU level; 
to promote compliance of IGAs with EU law, in particular with EU competition law 
and internal energy market legislation. 

Purpose of the current evaluation of the IGA Decision 

This evaluation has a twin purpose. Firstly, it serves as a basis for the report on the application 
of the IGA Decision required under Article 8 of that Decision. That report has to be prepared 
by January 2016 and "shall" in particular assess: 

 

 
 

the extent to which the IGA Decision promotes compliance of IGAs with EU law and 
promotes a high level of coordination between Member States with regard to IGAs; 
the impact the IGA Decision has on Member States' negotiations with third countries; 
the extent to which the scope of the IGA Decision and the procedures it lays down are 
appropriate. 

Secondly, this evaluation serves as one of the steps in the Impact Assessment for the review 
of the IGA Decision foreseen in the Energy Union Strategy of February 201525. On this basis, 
it  will  endeavour  to  answer  the  above  mentioned  questions  while  complying  with  the  five 
mandatory  evaluation  criteria  enshrined  in  the  Better  Regulation  Guidelines,  namely: 
effectiveness,  efficiency,  coherence,  relevance  and  EU  added  value.  It  will  also  address  the 
issue of the quantification of the costs and benefits of the IGA Decision and the potential for 
simplification. 

Scope of the current evaluation 

The current evaluation covers the application of the IGA Decision since its entry into force on 
17 November 2012 and its impact on IGAs notified both before and after that date. 
Under the current IGA Decision, the notification of agreements between commercial entities 
is not obligatory. Recital 7 of the IGA Decision instead states that Member States may, on a 
voluntary  basis,  communicate to  the Commission  commercial agreements  that  are explicitly 
referred to  in IGAs (although in  practice Member  States  have  not  made  use  of this option). 
This  issue  is  addressed  in  the  evaluation  carried  out  for  the  Impact  Assessment 
accompanying the revision of the Security of Supply Regulation. Therefore the issue of 
commercial agreements is not covered in this evaluation. 
This evaluation also does not address encompass the results of the public consultation that 
was carried out in the context of reviewing the IGA Decision. That consultation ran from July 
28th to October 22nd 2015. Responses to it from stakeholders, including Member States and 
energy-related  industry  associations,  have  been  compiled  and  analysed  in  a  stand-alone 
document that is annexed to the Impact Assessment on the review of the IGA Decision and 
that complements this evaluation report. 

25  

[…] [You may indicate the reference of the official Commission document]  

37 

 
 
 
 
 
 
 
 
 
                                                 
1) Effectiveness 
This section assesses, inter alia, the extent to which the objectives of the current IGA Decision 
have been achieved. 

To what extent has the IGA Decision promoted compliance of IGAs with EU law? 

Since adoption of the IGA Decision, 124 IGAs have been notified by Member States to the 
Commission.  As  far  as  it  is  possible  to  assess,  Member  States  have  therefore  in  general 
complied  with  their  notification  obligations.  However  there  are  agreements  that  are  not 
'legally binding agreements' either according to the definition set out in Article 2 of the IGA 
Decision  or  in  the  sense  of  public  international  law,  for  example  memoranda  of 
understanding, letters of intent, or political  declarations,  and for which there is therefore  no 
notification obligation under the current IGA Decision. Nevertheless such agreements can go 
into  great  detail  as  regards  the  legal  and  technical  specificities  of  e.g.  energy  infrastructure 
projects. 

Of the 124 notified IGAs: 

  Around  60%  covered  general  energy  cooperation  (mainly  bilateral  energy 
cooperation between EU Member States and a wide range of third countries including, 
for example, Cuba, Vietnam, Singapore, Korea, India or China). Some Member States 
have  notified  to  the  Commission  numerous  IGAs  of  this  type,  while  other  Member 
States  have  notified  none.  None  of  these  IGAs  raised  concerns  and  none  have 
therefore been followed up by the Commission; 

  Around 40% concerned either specific agreements on the supply, import or transit 
of  energy  products  (oil,  gas  or  electricity)  or  the  establishment  of  rules  for  the 
exploitation  of  gas  or  oil  fields;  or  bilateral  or  multilateral  agreements  for  the 
development of energy related infrastructure, with the great majority being oil and 
gas pipelines (including 6 South Stream IGAs concluded between EU Member States 
and Russia). 

After  analysing  the  notified  IGAs  in  the  last  category  above,  the  Commission  expressed 
doubts  on  the  compatibility  with  EU  law  of  17  of  them.  The  EU  law  in  question  mainly 
concerned  either  Third  Energy  Package  provisions  (e.g.:  ownership  unbundling,  third  party 
access  and  tariff  setting,  including  the  independence  of  the  national  regulator)  or  EU 
competition law (prohibition of market segmentation by means of destination clauses). 

With 17 of the IGAs concerning energy supplies or energy infrastructure being judged 
of  concern,  the  number  of  problematic  IGAs  in  this  category  is  therefore  significant, 
roughly around one third. 

Letters  were  sent  in  2013  to  the  9  Member  States  concerned  by  the  non-compatible  IGAs 
mentioned  above.  These  Member  States  were  invited  to  amend  or  terminate  the  IGAs  in 
question in order to resolve the identified incompatibilities. However, to date, no Member 
State has managed to terminate or renegotiate the IGAs in question.26  
This is a consequence in particular, of the complex legal situation that arises once IGAs are 
signed with a third country. Specifically, once a Member State has concluded an IGA which is 

26  
It should be noted that in some cases the IGA ceased to apply because the initial duration of the IGA 
has expired in the meanwhile or because a specific condition set out in the IGA was not fulfilled in time. (.  [It 
might be better not to disclose the MS and IGA concerned]. 

38 

 
 
 
 
 
 
 
 
                                                 
binding under public international law and which does not contain a termination or suspension 
clause, it is – in legal terms - almost impossible for the Member State concerned to terminate 
the  IGA  within  a  short  period  of  time  and  before  the  end of  the  initial  duration  of  the  IGA 
without the agreement of the third country. The same applies as regards the renegotiation an 
IGA for which the consent of the third country is required. This in turn considerably limits the 
enforcement powers of the Commission, even if an infringement process is launched. 
As regards new IGAs, meaning IGAs signed after the entry into force of the IGA Decision, 
only one IGA has been  notified to the Commission (in 2015). It is therefore not possible at 
this stage, due to the small sample size, to draw any general lessons as to the effectiveness of 
the IGA decision in ensuring the compatibility with EU law of IGAs adopted subsequent to its 
entry into force. 

In conclusion, the provisions of the current IGA Decision, in particular the ex-post nature 
of  the  compatibility  check  set  out  therein,  have  not  resulted  in  the  transformation  of 
concluded non-compliant IGAs into compliant ones. 

To  what  extent  has  this  Decision  impacted  on  Member  States'  negotiations  with  third 
countries? 

Since the adoption of the IGA  Decision,  the Commission has  not  been  notified of any IGA 
negotiations by Member States. 
However,  it  is  clear  that  Member  States  have  had  contacts  with  third  countries  about 
infrastructure  and  also,  by  inference,  commodity  supply.  As  mentioned  above,  the 
Commission  is  not  in  a  position  to  assess  the  extent  to  which  Member  States  and  third 
countries  have  entered  into  political  commitments  in  this  regard  (e.g.  in  the  form  of 
memoranda of understanding, exchanges of notes or letters of intent). 

In  conclusion,  the  provisions  of  the  current  IGA  Decision  have  not  directly  impacted 
Member States' negotiations with third countries. Neither have they (in particular due the 
ex-post  nature  of  the  compatibility  check  set  out  therein)  resulted  in  the  transformation 
concluded  non-compliant  IGAs  into  compliant  ones.  Therefore,  the  IGA  Decision  in  its 
present form is not considered effective. 

2) Efficiency 
This section assesses, inter alia, the costs imposed by the current IGA Decision and compares 
them  with  the  benefits  of  the  system  it  establishes  in  order  to  judge  if  the  said  costs  are 
justified. 

What are the costs imposed by the current IGA Decision? 

It is impossible to assess empirically or even to model the costs imposed by the current IGA 
Decision.  However  on  the  basis  that  the  current  IGA  Decision  requires  an  ex-post 
compatibility  check  of  IGAs  with  EU  law  the  following  qualitative  considerations  can  be 
highlighted: 

39 

 
 
 
 
 
 
 
 
 
 
 
 
IGAs that are compliant with EU law: 

For compliant IGAs and IGAs concerning general bilateral energy cooperation that engage no 
aspect of EU law the IGA Decision does not entail direct costs for Member States, apart from 
the  administrative  costs  linked  to  the  notification  of  IGAs  under  the  current  information 
exchange  mechanism.  These  administrative  costs  are  very  limited  as  IGAs  can  be  uploaded 
electronically  to  the  CIRCABC  web  portal  and  there  are  no  translation  requirements  (the 
Commission bears the costs of translation and analysis). 

IGAs that are assessed as being non-compliant with EU law: 

The  additional  direct  and  indirect  costs  resulting  from  an  IGA  being  assessed  ex-post  as 
incompatible with EU law, could be considered to include the following: 
Direct costs (only relevant to public authorities): 

  Administrative  costs  for  the  Commission  relating  to  internal  decision  making  and 

communicating with the Member State(s) concerned; 

  Administrative  costs  for  both  Member  State(s)  and  the  Commission  in  the  event  of 
follow-up  action  by  the  Commission  such  as  structured  dialogues  or  infringement 
procedures. 

Indirect  costs  (relevant  to  national  authorities  and  undertakings  involved  in  infrastructure 
projects): 

  Cancellation,  suspension  or  delay  of  infrastructure  projects  for  which  the  legal 
framework is ex-post assessed as being incompatible once the physical infrastructure 
has already been partly developed and/or costs have been incurred; 

  Litigation costs for Member States where no termination clauses have been inserted in 
their IGA and where the third country requests compensation for the non-application 
of the given IGA in front of an international arbitration court. 

What are the benefits associated with the current IGA Decision? 

Since the entry into  force of the IGA Decision the Commission  has  only been  notified  of 1 
new IGA. The other 123 IGAs of which the Commission has been notified were signed before 
2012. It is therefore difficult to assess the benefits of the current IGA Decision on the basis of 
concrete  examples.  Any  benefits  of  the  current  system  to  date  could  be  expected  to  have 
arisen from an increased level of IGA compliance with EU law resulting from an expectation 
on the part of those entering into it of it later being subject to ex-post assessment. 
The economic benefits of compliant IGAs are related to: 

 

Increased  legal  certainty,  which  favors  investment.  This  is  particularly  true  for 
infrastructure-related IGAs that are intended to provide legal and regulatory certainty 
for  projects  involving  high  levels  of  investment.  This  increased  legal  certainty  is 
particularly 
transit 
important  where 
agreement/infrastructure project; 

several  bilateral 

cover  one 

IGAs 

  a  well-functioning  internal  energy  market,  without  segmentation  at  a  national  level 

and with increased competition; 

40 

 
 
 
 
 
 
 
 
 
 

 

increased transparency as regards the security of supply situation in all Member States, 
which in turn can avoid double investment and/or infrastructure gaps; 
Increased  cooperation  between  Member  States  and  between  Member  States  and  the 
Commission  that  can  help  the  EU  to  speak  with  one  voice  to  third  countries  and 
therefore enhance the EU's bargaining power in energy negotiations. 

Cost and cost/benefit analysis 

For compliant IGAs, the current IGA Decision entails no significant administrative costs and 
has  the  potential  to  increase  investment  in  energy  infrastructure  through  enhanced  legal 
certainty. For non-compliant IGAs, the costs associated with the IGA Decision can be high if 
indirect  costs  are  taken  into  consideration,  and  are  related  to  the  ex-post  nature  of  the 
compatibility check it establishes. . The benefits associated with the IGA Decision as regards 
non-compliant IGAS relate to the safeguarding of the functioning and integrity of the internal 
energy market and the contribution that makes to security of supply. 

In  conclusion,  as  regards  cost  and  cost/benefit,  the  IGA  Decision  can  be  considered 
efficient.  Overall  the  costs  associated  with  the  current  IGA  Decision  are  justified  by  the 
benefits  it  provides  as  it  safeguards  the  functioning  and  integrity  of  the  internal  energy 
market  and  contributes  to  security  of  supply.  However,  the  IGA  Decision  could  be  more 
efficient if the compatibility check it establishes were done ex-ante (instead of ex-post as at 
present). This would considerably enhance legal certainty and avoid costs for both Member 
States and the Commission. 

3) Coherence 
This section assesses, inter alia, the extent to which the IGA Decision is coherent with other 
interventions which have similar objectives. 

The IGA Decision is coherent with a number of measures adopted at EU level to improve the 
functioning  of  the  EU  energy  market  and  to  increase  the  EU's  energy  security.  It  was 
developed  in  2012  and  complements  the  Security  of  Gas  Regulation  adopted  in  201027.  Its 
scope is however wider than gas-only IGAs, covering as it does "legally binding agreements 
between one or more Member States and one or more third countries having an impact on the 
operation or the functioning of the internal energy market or on the security of supply in the 
Union".  The  IGA  Decision  thus  applies  to  all  energy  commodities  related  supply  and 
infrastructures  IGAs,  in  particular  gas,  oil  and  electricity.  Only  IGAs  concerning  matters 
within the purview of the Euratom Treaty are not covered. For those IGAs, Article 103 of the 
Euratom Treaty provides for a specific ex-ante procedure. 

The review of the current IGA Decision forms part of the Energy Union Strategy adopted in 
February  2015,  which  sets  the  overall  context  and  governance  structure  for  a  renewed  EU 
energy policy. The Energy Union has 5 mutually reinforcing dimensions: 1) Energy security, 
solidarity  and  trust,  2)  A  fully  integrated  internal  energy  market,  3)  Energy  efficiency  as  a 
contribution  to  moderation  of  energy  demand,  4)  De-carbonisation  of  the  economy,  5) 

27 Gas Security of Supply Regulation (EU) 994/2010, OJ L 295, 12.11.2010, p.1 

41 

 
 
 
 
 
 
 
                                                 
Research,  innovation  and  competitiveness.  The  IGA  Decision  is  at  the  core  of  the  first  of 
these dimensions, which states: 

"An important element in ensuring energy (and in particular gas) security is full compliance 
of  agreements  related  to  the  buying  of  energy  from  third  countries  with  EU  law.  Such 
compliance  checks  for  Intergovernmental  Agreements  (IGAs)  and  related  commercial 
agreements  based  on  the  relevant  Decision  are  currently  carried  out  after  a  Member  State 
and a third country have concluded an agreement". 

In  conclusion,  the  IGA  Decision  is  fully  coherent  with  other  initiatives  that  have  similar 
objectives. 

4) Relevance 
This section assesses the extent to which the IGA Decision is still relevant. 

Another  finding  of  the  evaluation  report  is  that,  since  2012,  the  Commission  has  only  been 
notified of one new IGA. On the basis of this information, one could draw the conclusion that 
recent changes in the way energy commodities are imported into the EU have made IGAs less 
relevant for the energy sector. 

The Commission's assessment, however, is that the experience of the last 3 years does not on 
its own provide a full picture of the long-term relevance of IGAs. Indeed, an analysis of all 
124 previously mentioned notified IGAs (some of which have been signed for a period of 30 
years)  shows  that,  in  the  case  of  major  energy  infrastructure  investments  and  (to  a  lesser 
extent) in the case of energy product imports, the conclusion of IGAs will continue to play an 
essential role. 

Relevance of IGAs for infrastructure: 

IGAs  continue  to  be  relevant  to  the  physical  delivery  of  commodities  to  the  EU. 
Significant infrastructure projects of the past (and future) continue to rely on public support in 
the form of IGAs that will need to be agreed or renewed in the coming years. 

In the case of gas supplies, the share of piped gas in total extra-EU imports reached 90% in 
2014,  or  roughly  257  bcm  out  of  a  total  of  286  bcm.  The  majority  of  the  gas  pipelines 
connecting the EU to its trading partners were commissioned in the period from the late 1970s 
to  the  late  1990s  and  were  based  on  contractual  agreements  between  the  project  promoters 
that were often underpinned by one or several agreements between the producing, transiting 
and receiving countries (see table below28): 

28 Source: on the share: ENTSO-G, 2014 

42 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Exporting 
country 
Norway 

Importing 
country 
UK 

France 
Belgium + others 
Germany + others 

Algeria 

Spain 

Lybia 
Russian 
Federation 

Italy 
Italy 
Germany 
Poland + others 
Slovakia + others 
Romania + others 

Selected pipelines 

FLAGS 
VESTERLED 
LANGELED South 
FRANPIPE 
ZEEPIPE 
NORPIPE 
EUROPIPE I 
EUROPIPE II 
MEG 
MEDGAS 
TRANSMED 
GREENSTREAM 
NORDSTREAM 
YAMAL 
BROTHERHOOD 
TRANS-BALKAN 

Year of 
commissioning 
1978-1982 
1978 
2006 
1998 
1993 
1977 
1995 
1999 
1996 
2010 
1983 
2004 
2011 
1997 
1984 
1987 

With  regard  to  oil:  90%  of  EU  crude  oil  imports  are  sea-borne  and  only  10%  arrive  via 
pipeline  infrastructure  for  which  project  developers  might  require  an  IGA.  For  example  a 
number of the refineries in the Baltics and Central Europe are reliant to various degrees on the 
Druzhba pipeline connecting those regions with production fields in the Russian Federation. 
As with the natural gas pipelines described above, the Druzhba pipeline system was built in 
the '60s and '70s (see table below29): 

FROM 

TO 

NAME 

RF-BY-
UA 
RF-BY-
UA 
RF-BY 
RF-BY 

HU 

SK 

PL 
LV 

RF-BY 

LT 

Capacity 
(kb/d) 
160 

400 

Druzhba South 
II 
Druzhba South 
I 
Druzhba North  1000 
Polotsk - 
Ventspils 
Polotsk - 
Mazeikai 

Capacity (Mt/y) 

Built 

7.9 

20 

50 
14 

16 

1963 

1962 

1963 
1968 

1979 

With regard to electricity: the share of EU net imports in gross electricity generation is less 
than 1% for the EU2830. As in the case of crude oil, there are several EU Member States that 
trade  actively  with  non-EU  neighbouring  countries.  As  shown  in  the  next  table,  Croatia, 
Lithuania  and  Latvia  import  more  than  20%  of  their  electricity.  Since  the  Ignalina  nuclear 

29 Source: IEA, energy policies of selected IEA countries; public sources on the internet 
(https://en.wikipedia.org/wiki/Druzhba_pipeline ) 
30 Source: annual data from ESTAT 

43 

 
 
 
 
 
 
 
 
 
 
 
                                                 
 
 
 
power  plant  was  shut  down  at  the  end  of  2009,  Lithuania  in  particular  relies  heavily  on 
electricity imports: in 2012 the country imported 29% of its annual power needs from Russia 
via a 750 kV transmission line and 25% from Belarus (through several transmission  lines of 
300-330 kV voltage). Thus some isolated electricity systems in the EU (notably in the Baltic 
Member States) rely heavily on electricity imported via cables from third countries. As with 
gas and oil, the relevant connecting infrastructure was constructed several decades ago. 

In summary, either a large share of a commodity at EU level (in the case of gas) or a critical 
share  of  a  commodity  for  specific  EU  Member  States  (in  the  case  of  oil  and  electricity)  is 
imported into the EU from third countries via physical connections (pipelines or cables). The 
construction  of  such  complex  infrastructure,  in  some  cases  spanning  several  thousand 
kilometers,  was  often  and  is  still  based  on  complex  contractual  agreements  between  the 
project  promoters  that  is  often  underpinned  by  one  or  several  agreements  between  the 
producing, transiting and receiving countries. 

Some of these IGAs, many of which were signed for a long period of time (15 to 30 years), 
will need to be renewed or amended (this was the case for the recent IGA between Russia and 
Slovakia on oil supply, which renews the one signed in 1999). Due to the long time span of 
many IGAs, their renewal and notification is subject to a cyclical effect. It does not therefore 
necessarily follow that because the Commission has only been notified of one IGA since 2012 
that it will not be notified of new IGAs in future. It is also not the number of notified IGAs 
that matters but the importance of the projects they underpin, and their compliance with EU 
law.  With  respect  to  the  renewal  of  IGAs  for  older  infrastructure,  the  initial  construction-
related risks may also by this point have been mitigated, meaning that it may be all the more 
important now to carry out an assessment of the IGA's compliance with EU law. A number of 
IGA's  will  therefore  continue  to  require  a  careful  legal  follow-up.  With  regard  to  the 
transit/transport of gas, for example, some IGAs still prescribe a number of clauses which go 
against the modern entry/exit system (e.g. some IGAs mandate physical metering of gas and 
de facto therefore prevent the shift to the modern entry/exit system). 

44 

 
 
 
 
 
 
 
 
 
 
Relevance of IGAs to EU diversification policy and for future infrastructure projects 

EU import dependency is expected to remain stable or increase over the  next two decades31 
(for  fuels,  technology  and  other  materials).  Although  only  a  limited  number  of  new  energy 
corridors are expected to be developed in the coming years, the potential new infrastructure 
involved  in  each  of  them  could  have  an  impact  on  the  entire  European  Union  energy 
market. It is therefore essential that IGAs related to such infrastructure be compatible 
with EU law and with the EU's diversification policy. 

Moreover, for new infrastructure projects, the number of issues typically referred to in IGAs 
is increasing. As energy routes increase in length, the number, legal hierarchy and complexity 
of  IGAs  also  increases,  such  that  a  simple  network  connection  that  would  have  been  built 
without  an  IGA  in  the  1970s  increasingly  requires  a  series  of  overlapping,  sometimes 
conflicting IGAs. To give an example, a network connection from Baku to the EU under the 
aegis  of  the  Southern  Corridor  initiative  involves  up  to  20  different  agreements,  more  than 
half  of  them  being  IGAs  and  "Host  Government  Agreements"  (i.e.  agreements  between 
governments and companies). For fuels, liability is a major issue that can only be dealt with 
by  governments  and  nearly  all  network  connections  are  subject  to  bilateral  or  multilateral 
IGAs. Through the liability issue, jurisdiction must also be asserted, which implicates tax. In 
the  context  of  this  growing  complexity  IGAs  remain  relevant,  particularly  as  regards  any 
potential  new  energy  project  development  carried  out  in  the  context  of  the  EU's  energy 
diversification policy, for instance in the Mediterranean area. 

Relevance of IGAs to energy supply 

At EU level, the way in which energy commodities are imported into the internal market has 
changed  over  the  last  decade.  For  gas  in  particular  the  preferred  means  of  price  setting  has 
shifted  from  long  term  oil  indexed  contracts  to  a  market  based  mechanism,  i.e.  hub  pricing 
(see table below): 

31 In 2013, indigenous EU production represented about 35% (157 bcm) of total EU gas consumption of ca. 450 
bcm. About 290 bcm were imported through pipelines from Russia (27%), Norway (21%), and Algeria (8%) and 
Qatar (5%). Consequently, with total EU production expected to decrease by 2030 to about 110 bcm per year 
(while conventional gas production is projected to diminish from currently ca. 140 bcm to about 80 bcm in 2030, 
any  increases  in  non-conventional  and  biogas  production  will  not  be  able  to  make  up  for  that  decline  with 
expected  contributions  of  respectively  about  15  bcm  and  13  bcm  in  2030)  and  overall  EU  demand  in  2030 
expected to lie in a range between 380 and 450 bcm (in line with the different PRIMES scenarios), EU import 
needs are likely to be within a range between 270 and 340 bcm in 2030. See also intermediate scenarios in 2015 
ENTSOG's 10 year network development plan, http://user-30078157.cld.bz/ENTSOG-TYNDP-2015 

45 

 
 
 
 
 
 
 
 
                                                 
However,  the  general  shift  towards  gas  market-based  pricing  mechanisms  conceals  the 
disparities  that  exist  between  individual  EU  Member  States.  Whereas  the  situation  in 
Member States in Central and Northwestern Europe mirrors the general trend, other regions of 
the EU have not yet experienced the switch to hub-based pricing. 

Network-related IGAs for gas pipelines developed in recent decades were meant to reduce the 
political  risks  for  project  promoters  during  the  construction  phase.  As  these  pipelines  have 
been  operational  for  many  years  and  the  construction  risks  have  therefore  been  largely 
mitigated, it is all the more important that the relevant IGAs (or the amended versions thereof) 
be  in  compliance  with  EU  legislation.  This  is  also  applicable  for  network-related  IGAs 
relating to oil or electricity. 

Hence, irrespective of how the commodity is priced, it is likely that IGAs will remain relevant 
in order to agree on the modalities for developing large-scale infrastructure projects. 

46 

 
 
 
 
 
 
 
 
 
 
 
 
 
Overall relevance assessment 

In conclusion: the Commission's assessment is that IGAs will continue to play a key role in 
the  EU's  energy  sector.  The  IGA  Decision  is  thus  still  relevant  but  needs  to  adapt  to  the 
changing nature of energy supplies and routes. 

5) EU added value of the intervention 
This  section  assesses,  inter  alia,  the  extent  to  which  the  issues  addressed  by  the  2012  IGA 
Decision continue to require action at EU level. 

In  terms  of  energy  security,  the  situation  of  Member  States  is  very  diverse.  Europe's  least 
vulnerable areas are those where supplies are available from a substantial number of different 
sources  and/or  through  a  substantial  number  of  different  routes  and  where  there  is  a 
functioning and liquid wholesale market. The most vulnerable areas often suffer from a lack 
of infrastructure that is needed both to enjoy such a diverse supply base and for a functioning 
market  to  develop.  While  liquid  markets  are  found  only  in  a  limited  number  of  countries, 
those countries nevertheless cover some 80% of total EU gas demand.  

This differentiated situation means that different EU Member States have different levels of 
bargaining  power  vis-à-vis  third  countries,  and  different  levels  of  exposure  to  external 
pressure.  The  progressive  integration  of  energy  infrastructure  and  markets  and  the  resulting 
common reliance on external suppliers imply that fundamental political decisions on energy 
taken by one Member State should be discussed with neighbouring countries. The same holds 
true for the external dimension of EU energy policy. The IGA Decision plays a crucial role in 
linking  the  external  dimension  of  energy  policy  (because  it  relates  to  agreements  with  third 
countries) and the internal dimension (because provisions in IGAs that are not compliant with 
EU law have a negative impact on the functioning of the internal energy market). 

In  conclusion:  there  is  a  clear  EU-added  value  to  the  IGA  Decision,  as  it  reinforces 
cooperation and transparency at EU level and contributes to the functioning of the internal 
energy market and to security of supply. 

Simplification 

This  section  assesses,  inter  alia,  whether  there  is  potential  for  simplification  in  the  current 
IGA Decision. 

The  current  IGA  Decision  establishes  a  relatively  simple  information  exchange  mechanism. 
The main administrative  burden for Member States relates to  the notification process.  IGAs 
can  be  uploaded  electronically  to  the  CIRCABC  web  portal  and  there  are  no  translations 
requirements (the European Commission bears the costs of translations and analysis). 

A clarification rather than a simplification could be envisaged. In Article 3 of the current IGA 
Decision the deadline for submission of existing IGAs is 17 February 2013. As this does not 
apply  anymore  it  could  instead  be  clarified  that  the  current  9  month  ex-post  assessment 
deadline applies to all new IGAs concluded after the entry into force of the IGA Decision. 

In  conclusion:  there  is  limited  potential  for  simplification  in  the  current  IGA  Decision. 
However a clarification could be introduced concerning the submission deadline for IGAs 
concluded after the entry into force of the IGA Decision. 

47 

 
 
 
 
 
 
 
 
 
Overall Conclusion 

This report is based the experience gained by the Commission since the entry into force of the 
IGA Decision in 2012 and on the in-depth analysis of the 124 IGAs notified in this context. 
This provides a solid basis for an overall qualitative assessment of the current system based 
on the criteria set in Article 8 of the IGA Decision: 

  This  report  concludes,  as  regards  the  effectiveness  of  the  IGA  Decision,  that  its 
current provisions (in particular the ex-post nature of the compatibility check set out 
therein),  have  not  resulted  in  the  transformation  of  concluded  non-compliant  IGAs 
into compliant ones and have not directly impacted Member States' negotiations with 
third countries. In particular, no draft IGA has ever been submitted to Commission on 
a voluntary basis for ex-ante check. Therefore the IGA Decision in its present form is 
not considered effective. 

  As  regards  efficiency  and  in  particular  the  aspects  of  cost  and  cost/benefit,  the  IGA 
Decision  is  considered  efficient.  Overall  the  costs  associated  with  the  current  IGA 
Decision are justified by the benefits it provides as it safeguards the functioning of the 
internal  energy  market  and  contributes  to  security  of  supply.  However,  the  IGA 
Decision  could  be  more  efficient  if  the  compatibility  check  it  establishes  were  done 
ex-ante  (instead  of  ex-post  as  at  present).  This  would  considerably  enhance  legal 
certainty and avoid costs for both Member States and the Commission. 

  On coherence, the IGA Decision is judged to be fully coherent with other initiatives 

and legislative acts that have similar objectives. 

  On relevance, this report makes clear that IGAs will continue to play a key role in the 
EU's energy sector. The IGA Decision is therefore relevant but needs to adapt to the 
changing nature of energy supplies and routes. It also underlines that there is a clear 
EU-added value to the IGA Decision, as it reinforces cooperation and transparency at 
EU  level  and  contributes  to  security  of  supply  and  the  functioning  of  the  internal 
energy market. 

  Finally, as regards simplification, a clarification could be introduced concerning the 
submission  deadline  for  IGAs  concluded  after  the  entry  into  force  of  the  IGA 
Decision.  Specifically, it  could  be  stipulated that  the  9  month  ex  post-assessment  by 
the Commission shall not apply to IGAs which were submitted to the Commission for 
ex ante assessment. 

Overall,  therefore,  this  report  concludes  that  the  procedures  laid  down  by  the  current  IGA 
Decision are not fully appropriate, with the main procedural issue in this regard being the ex-
post nature of the compatibility check under the current system, which was the result of tough 
inter-institutional negotiations when the IGA Decision was adopted in 2012. 

48 

 
 
 
 
 
 
 
ANNEX 2: RIGHTS AND OBLIGATION UNDER THE CURRENT IGA DECISION 

The current mechanism, established in 2012, contains the following main features: 

Scope of application 

The IGA Decision establishes an information mechanism with regard to  "intergovernmental 
agreements".  These  are  "legally  binding  agreements  between  one  or  more  MS  and  one  or 
more  third  countries  having  an  impact  on  the  operation  or  the  functioning  of  the  internal 
energy market or on the security of supply in the Union". 

Commercial  contracts  between  Governments  and  private  undertakings  or  between  different 
private undertakings are thus not covered. According to the IGA Decision MS may, however, 
on  a  voluntary  basis  communicate  to  the  Commission  commercial  agreements  that  are 
explicitly referred to in IGAs (recital 7 of the IGA Decision).  

The IGA Decision imposes the following obligations on MS and Commission respectively: 

Obligations and rights of the Member States 

 
 
 

Obligation to submit existing IGAs to the Commission by 17 February 2013; 
Obligation to submit new or amended IGAs to the Commission once ratified; 
Member  States  "may"  (i.e.  no  obligation)  also  inform  the  Commission  of  on-going 
IGA negotiations, ask/permit the Commission to participate in the negotiations and ask 
for a compatibility check of a draft IGA. 

Obligations and rights of the Commission 

 

 

 

 
 

Compatibility  checks  of  existing  IGAs  and  notification  by  the  Commission  to  the 
Member States of any doubts about the compatibility with EU legislation nine months 
after the submission of the relevant IGA; 
Compatibility  check  of  negotiated  but  not  yet  concluded  IGAs  upon  request  of  a 
Member States. The Commission has four weeks to raise any doubts it may have. In 
case of any doubt, the Commission has further six weeks to perform the compatibility 
check  and  to  issue  an  opinion.  These  time  periods  can  be  shortened  or  extended  in 
certain circumstances; 
Assistance  to  Member  States  asking/permitting  the  Commission  to  participate  in  on-
going IGA negotiations; 
Sharing of information about on-going negotiations with other Member States; 
Facilitating  and  encouraging  coordination  among  Member  states  in  view,  amongst 
others, to identifying common problems in relation to IGAs and to developing optional 
model clauses. 

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 3: ANALYSIS OF THE RESPONSES TO THE PUBLIC CONSULTATION 

The  public  consultation  on  the  revision  of  the  IGA  Decision  ran  from  July  28th  to  October 
22nd 2015. 

The  Commission  received  some  25  responses  from  stakeholders.  These  included  answers 
from 11 Member States or national regulatory authorities in the field of energy, the Energy 
Community  Secretariat,  6  major  EU  energy  companies,  5  energy-related  business 
federations or chambers of commerce and two answers from individual citizens. 

Although  the  number  of  responses  might  appear  limited,  the  inputs  received  cover  a  wide 
variety  of  players  and  represent  a  broad  spectrum  of  different  opinions,  as  detailed  in  the 
analysis  below.  As  many  of  the  answers  were  cross-cutting  in  nature,  the  analysis  is  not 
presented question by question but instead summarises the key outcomes of the consultation: 

The need to strengthen the system established by the current IGA Decision 

All  respondents  underlined  the  importance  of  IGAs  to  security  of  energy  supply  and  the 
proper functioning of the internal energy market. As regards the need to strengthen the system 
established  by  the  current  IGA  Decision,  opinions  within  each  of  the  main  categories  of 
respondent were divided: 

  Public  authorities:  6  Member  States  or  regulatory  authorities  felt  that  the  current 
system should be reinforced (with one of them stressing, however, that this should not 
be  done  in  such  a  way  as  to  entail  an  excessive  additional  administrative  burden).  5 
Member States were of the opinion that no revision of the current system was needed 
and  that  its  full  implementation  should  be  sufficient  to  ensure  the  transparency  of 
IGAs and their compliance with EU law. 

  Business:  a  large  majority  of  the  responses  from  business  stakeholders  stressed  two 
main points:  the need  to keep  commercial contracts outside of the scope of the IGA 
Decision and the fact that the current system was sufficient to reach the objective of 
ensuring transparency and compliance of IGAs with EU law. However 2 large energy 
companies  were  of  the  opinion  that  the  current  system  should  be  reinforced,  with  1 
company  even  proposing  that  commercial  undertakings  be  given  the  right  to  seek 
Commission advice during the negotiation process. 

The mandatory ex-ante verification mechanism 

Opinions  on  the  need  to  introduce  an  ex-ante  verification  mechanism  mirrored those  on  the 
need to strengthen the IGA Decision, with those in favour of strengthening the IGA Decision 
generally  believing  that  the  introduction  an  ex-ante  verification  mechanism  should  be  the 
main  vehicle  for  that  reinforcement  and  those  who  felt  that  the  current  IGA  Decision  was 
sufficient generally opposing such a mechanism. 

A particular point was raised by the Secretariat of the Energy Community, which suggested in 
its response that the IGA Decision be extended to involve the Energy Community and that the 
Secretariat be involved in ex-ante notification and verification. 

50 

 
 
 
 
 
 
 
 
 
 
The scope of the ex-ante assessment 

Respondents who were in favour of an ex-ante assessment all expressed the view that such an 
assessment should be limited to EU law. Views amongst them varied however on the area of 
the  EU  acquis  that  would  be  most  relevant,  with  most  citing  competition  law  and  internal 
energy market rules as being the most appropriate. Some amongst them cited rules on security 
of  supply,  including  "soft  law"  such  as  Communications  and  Strategies  endorsed  by  the 
European  Council,  while  others  did  not.  Respondents  also  cited  rules  on  transparency  (i.e. 
REMIT, EIR, MIFID 2). 

Article 103 Euratom as a model for an ex-ante mechanism 

Respondents in favour of establishing an ex-ante mechanism generally insisted on the need to 
establish not just the principle but also the specific procedures involved in such a verification 
mechanism. While the majority of such respondents felt that Article 103 Euratom was a good 
source of inspiration in that regard, some made clear that this article was specific to nuclear 
IGAs and would not be suitable for IGAs related to other energy commodities  – or was not 
appropriate  in  terms  of  timing  and/or  specific  procedures.  One  respondent  also  cited  as  a 
potential  source  of  inspiration,  at  least  in  terms  of  procedures,  the  mechanism  used  for  the 
designation and certification of transmission system operators for electricity and gas, set out 
in  article  10  and  11  of  Directives  2009/72/EC  and  2009/73/EC  and  Article  3  of  Regulation 
714/2009 and 715/2009. 

The  stage  in  negotiations  at  which  Member  States  should  inform  the  Commission  of  the 
planned conclusion of an IGA 

Respondents  in  favour  of  an  ex-ante  mechanism  underlined  that  this  process  should  be  an 
ongoing  one,  with  regular  contacts  between  the  Commission  and  the  Member  State(s)  in 
question.  They  stressed  however  the  importance  of  two  key  points  in  time  (with  some 
variation in views in each case): 

1) As regards the beginning of negotiations: some advocated an information exchange before 
the start of the negotiation process while others felt this should be at its start. There were also 
differences of opinion on whether it should be voluntary or mandatory. 

2)  As  regards  the  end  of  negotiations:  some  proposed  an  ex-ante  assessment  immediately 
after agreement on the final draft IGA, whilst others thought this should take place before the 
IGA  was  initialled  or  signed.  One  respondent  highlighted  the  importance  of  providing 
sufficient time for the compliance check at the end of the process and raised the possibility of 
late drafts being shared before agreement on the final pre-signature version. 

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Mandatory assistance from the Commission in the negotiation of IGAs 

A  large  majority  of  the  respondents  were  opposed  to  mandatory  assistance  from  the 
Commission in the negotiation of IGAs. 

Respondents from a business background stressed the need to avoid mandatory participation 
in  the  negotiation  of  commercial  contracts.  Respondents  opposed  to  including  an  ex-ante 
verification mechanism stressed the competence issue and underlined that the existing system, 
which  allowed  the  assistance  of  the  Commission  on  a  voluntary  basis  at  the  request  of  the 
Member  States,  was  a  good  tool.  Some  Member  States  also  insisted  on  the  fact  that  third 
countries might not accept the mandatory participation of the Commission in negotiations. 

Those  in  favour  of  an  ex-ante  mechanism  suggested  that  it  would  make  the  mandatory 
participation  of  the  Commission  in  negotiations  less  necessary.  Some  of  these  respondents 
expressed  a  more  nuanced  position  on  the  notion  of  mandatory  participation  supporting  an 
approach where mandatory assistance would not necessarily mean actual participation at the 
negotiation  table  but  instead  regular  information  exchange  and  compliance  checks  of  the 
IGAs concerned. Only one Member State was clearly in favour of the mandatory participation 
by the Commission, without prejudice to the sovereign rights of Member States to negotiate 
IGAs, and proposed a mechanism allowing the Commission to assist with and participate in 
negotiations as an observer while leaving the Member State(s) the right to decide on the scope 
of IGAs and subsequent contracts. 

Model clauses 

The great majority of respondents were in  favour  of the current system,  which provides the 
possibility of developing optional model clauses. 

On  the  content  of  such  clauses,  many  respondents  highlighted  the  difficulty  of  developing 
clauses  that  would  be  suitable  for  energy  projects,  given  that  these  were  often  extremely 
complex and varied. Some underlined the usefulness of having clauses related to the technical 
aspects of the energy internal market (i.e. unbundling, 3rd party access, tariff setting). On the 
form of such clauses: some respondents proposed a list of best practice, while others a list of 
clauses that were deemed to be contrary to EU law (or abusive). On legal effect, most of the 
respondents  were  in  favour  of  keeping  the  use  of  model  clauses  optional  and  flexible.  A 
limited number of respondents proposed a more stringent system, whereby only model clauses 
should  be  used,  unless  a  change  were  duly  justified,  or  a  system  whereby  the  use  of  model 
clauses  would  create  a  presumption  of  conformity  that  would  obviate  the  need  for  a 
subsequent  ex-ante  assessment.  On  the  process  for  developing  model  clauses,  almost  all 
respondents in favour of model clauses wanted clauses to be developed in close cooperation 
with Member States. 

Access to the individual responses to this public consultation 

The Commission has contacted respondents to obtain their consent to publish their responses. 

Where these are not confidential they can be found at the following address: 

XXX: on-going 

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