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Legal Feasibility of Schengen-like Agreements in European Energy Policy

April 14th, 2010 by Jean-Michel Glachant, European University Institute

Recent declarations of European leaders, like J. Buzek President of the Parliament, or the former European Commission President J. Delors, remind the necessity to accelerate the Europeanization of energy policy. They demonstrate a renewed interest for potentialities and limitations of the current decision-making mechanisms in this area. The establishment of a new European Energy Community, the revamping of the old EURATOM Treaty or an ‘enhanced cooperation’ mechanism are propositions to provide a way out and are increasingly structuring the energy policy debate today.

Several Member States are actually able to reach certain common positions in energy policy. They need more flexible forms of integration to commit on a regional or functional basis. The development of “Regional Initiatives” in gas or electricity proves that some cooperation at the sub-European level is in fact possible. The scope of these initiatives is however inherently limited and an EU differentiation on a more ambitious scale will require legally-binding frameworks.

Differentiation as offered by the Lisbon Treaty provisions for ‘enhanced cooperation’ has few advantages but remains a very rigid solution. A natural alternative is then offered by partial agreements between some Member States inspired by the Schengen regime. In this regime, Member States exercise their treaty-making powers to establish mutual relationships. Acting here under international law Member States preserve complete control over the negotiations process and almost complete control over implementation and enforcement of the obligations they accept.

As a general rule, the EU Member States are free to enter into such kind of agreements as long as they are in compliance with existing EU law. The legal limits to the Member States’ ability to conclude Schengen-like agreements derive from the principle of supremacy of EU law which establishes its absolute superiority over national law.

One can assess the legal feasibility of Schengen-like agreements in following five key implementing principles that we found in the jurisprudence of the European Court of Justice:

1. Does the agreement legislate in an area of exclusive EU competence? Typical fields of EU exclusive competence are e.g. the common commercial policy or competition law. In these areas, Member States are precluded from concluding partial agreements under international law even if EU law has so far remained silent.

2. In areas of shared competence, does the agreement affect a general field with which EU law has dealt extensively? The proliferation of EU law in many fields of shared competence (energy included) appears very restrictive of the Member States’ treaty-making powers. This is a situation which has to be assessed case-by-case and should not be assumed too lightly. This argument has been mostly raised by the Court in the case of agricultural markets.

3. Does the agreement conflict substantively with the existing rules or the objectives of EU law in the relevant field? The problem here is to assess the substantive compatibility of a projected agreement with the existing rules and objectives in this precise area of Union law. A sliding scale must be used as some minor, hypothetical or temporary conflict could for instance be accepted.

4. Does the projected agreement interfere with the proper functioning of the EU system? This is particularly important in sectors where the EU builds both competitive markets and the institutions to support them.

5. Does the agreement respect the general principles of EU law? In practice, a typical incompatibility which may arise is related to discrimination on grounds of nationality. Such discrimination are difficult to avoid in Schengen-like agreements to which only some Member States participate. In energy, state aid and competition rules will also have to be taken into account since such an agreement should never distort competition in the internal energy market.

6. Where action at EU level is only marginally less appropriate than an agreement between Member States, EU action should be preferred (principle of subsidarity). This is a sort of ‘value-added’ test. Thus, Schengen-like agreements would more easily pass such a test in case of e.g. an agreement involving a few neighboring Member States on a highly localized issue and would be less suitable when strong externalities on other (non-contracting) Member States exist.

Obviously, such assessment can be made only on a case-by-case basis. Thus, we did look more closely at two energy areas where increased cooperation at the sub-European level is often called for: nuclear policy and gas security of supply. We found very different results: while the scope for Schengen-like agreements seems very limited for gas security of supply, it could constitute an improved cooperation device in certain domains of nuclear policy.

The nuclear industry has a general need for a high level of security, stability and for reduction of regulatory risks. However, a Schengen-like agreement cannot give exclusive market advantages favoring nuclear because competition policy is an exclusive EU competence. Instead, a Schengen-like agreement would be possible on common facility design certification, management of radio-active waste and spent nuclear fuel, or the setting-up of regional repositories.

When it comes to gas security of supply inside the EU there is already an exhaustive regulatory coverage by EU legislation (including the Third Package and coming gas security of supply Regulation). Of course it would be beneficial to establish transparency, emergency or solidarity mechanisms at a regional level. However, the comprehensiveness of existing regulations at EU level pre-empts the Member States from concluding new partial agreements in this area. With regard to security of supply outside the EU (i.e., with third countries), no partial energy agreement could exclude the EU as a party as it it would touch upon EU exclusive competences such as on external trade policy. As a consequence, we consider a so-called ‘mixed agreement’ involving Member States and the EU as the legally feasible option.

To conlude: it can be stated that short-run differentiation of EU energy policy inspired by the Schengen regime might not be legally feasible in every energy area. The decisive criterion is the respective development of EU legislation in the particular field. This sets the limits and also the opportunities for such agreements. Nevertheless, in certain targeted areas, Schengen-like agreements seem to be the right sort of legal framework for legally binding cooperation at the sub-European level. They could in fact be used as an interim step towards an extensive EU-wide harmonization like the one advocated by Jacques Delors and “Notre Europe”.

Nicole Ahner, Jean-Michel Glachant and Adrien de Hauteclocque
Loyola de Palacio Chair and Florence School of Regulation,
European University Institute RSCAS in Florence

P.S. This blog is based on Ahner, Glachant and de Hauteclocque, “Legal Feasibility of Schengen-like Agreements in EU Energy Policy: the Cases of Nuclear Cooperation and Gas Security of Supply”, FSR/LdP Working Paper.

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One Response to “Legal Feasibility of Schengen-like Agreements in European Energy Policy”

  1. Roy Says:

    While energy policy is one area where co-operation between European nations is desirable, too much reliance upon European law and regulations is likely to play into the hands of those campaigning for less interference from the Brussels bureaucracy. With budget problems persisting across Europe and the EU failing to make cuts itself, less interference and resort to EU ‘law’ is a course that the EU will need to take if it is to survive. When it comes to energy policy national politics will always have a major impact, as we have recently seen in Germany following the Japanese disasters. National leaders need enough flexibility to deal with local issues, and not be bound by distant and undemocratic European ‘law’. With the election success of the True Finns, and mounting pressure in the UK for total withdrawal from the EU, extending EU interference is not something to be taken lightly.

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