Documents considered by the Committee on 12 September 2018 Contents

3Common Rules for EU Internal Gas Market

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/73/EC concerning common rules for the internal gas market

Legal base

Article 194(2) TFEU; Ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(39220), 14204/17 + ADD 1, COM(17) 660

Summary and Committee’s conclusions

3.1The Commission has proposed to extend its rules on the internal gas market to cover pipelines from third countries. In its original Explanatory Memorandum, the Government was supportive, noting that the proposal would be helpful to the UK post-Brexit as it would ensure a consistency of approach with a view to the smooth flow of gas between the UK and the EU.

3.2We first considered the proposal at our meeting of 19 December 201748 and raised a series of Brexit-related queries focused largely on UK regulatory autonomy post-Brexit. In her response of 8 May,49 the Minister for Climate Change and Industry argued that there is sufficient flexibility in the text that it should not be the case that the legislation will effectively bind the UK to EU rules with little influence. On Northern Ireland, future arrangements for gas market rules on the island of Ireland form part, said the Minister, of the ongoing intensive discussions.

3.3As to the progress of negotiations on this proposal, the Minister explained that discussions had largely focused on two areas of legal concern:

3.4We responded by letter of 6 June with further queries on the legal issues (see below). The Minister has now written again.50 On the questions relating to the Exclusive Economic Zone (EEZ) extension, she explains that:

3.5Responding to the questions about the EU’s exclusive external competence to conclude international agreements on third country interconnectors, she says that:

3.6The Minister concludes with an update on negotiations, explaining that technical work is proceeding.

3.7We note the Minister’s response and the pragmatic approach that is being pursued. We ask that the Government continues to bear in mind our areas of legal interest when providing further updates. We look forward to an update in due course. The proposal remains under scrutiny. We draw this chapter to the attention of the Business, Energy and Industrial Strategy Committee.

Full details of the documents: Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/73/EC concerning common rules for the internal gas market: (39220), 14204/17 + ADD 1, COM(17) 660.

Letter from Sir William Cash MP to the Rt Hon Claire Perry MP, dated 6 June 2018

3.8We noted that the UK remains broadly supportive of this highly political proposal, linked to the planned Nord Stream 2 gas pipeline from Russia to Germany, but that some legal issues have arisen since the Government’s original Explanatory Memorandum.

3.9We observed that the proposal would extend internal energy market rules:

3.10On the EEZ extension, we said:

“The Council’s Legal Opinions51 that you mentioned in your letter are in the public domain so we are aware of their content. We know that the Opinion on the EEZ extension concludes that it would be incompatible with UNCLOS.52 This is on the basis that if a pipeline only transits through a Member State’s EEZ (as opposed to their territorial waters), then to assert jurisdiction would be incompatible with UNCLOS. The legal reasoning in the Opinion highlights that, at the very least, there is insufficient clarity about the position under UNCLOS for the EU to assert jurisdiction over the EEZ of Member States because it is unclear that Member States can do so in their own right.

3.11We therefore asked:

3.12Turning to EU exclusive external competence to conclude international agreements on third country interconnectors, we said:

“You highlight in your letter that the Council and Commission legal services are agreed that to the extent that the operation of a third country pipeline is liable to affect or alter the scope of common internal market rules, then the EU would be afforded exclusive external competence. This would be the case if the Council were to adopt the ‘third country extension’ as an intrinsic part of this proposal. As orthodox EU law,54 this is not controversial and is now explicitly provided in Article 3(2) TFEU.55

“But it has implications for the UK as a future third country after 31 December 2020, as the EU is proposing to negotiate international agreements on the part of Member States because of the conflict of EU law and third country laws in respect of future pipelines. There is even the possibility that existing bilateral interconnector agreements between Member State and third countries will have to be renegotiated if incompatible with other liberalising aspects of the proposal.”56

3.13We therefore asked:

Previous Committee Reports

Seventh Report HC 301–vii (2017–19), chapter 4 (19 December 2017).


48 Seventh Report HC 301–vii (2017–19), chapter 4 (19 December 2017).

49 Letter from the Rt Hon Claire Perry MP to Sir William Cash MP, dated 8 May 2018.

50 Letter from The Rt Hon Claire Perry MP to Sir William Cash MP, dated 4 July 2018.

51 CLS Opinions on competences and on the EEZ and compatibility with UNCLOS.

52 See in particular, UNCLOS Part V Exclusive Economic Zone (EEZ) in particular Article 56 and Part VI Continental Shelf, in particular Article 79.

53 See Council Document 6851/18, 27 March 2018

54 Article 3(2) TFEU codifies the ECJ’s case law to be found in AETR Case C-22/70 and similar cases.

55 “The Union shall also have exclusive competence for the conclusion of an international agreement….in so far as its conclusion may affect common rules or alter their scope”

56 We note here the recent judgment in C-284/16 Slowakische Republik v Achmea BV where the CJEU ruled that an arbitration clause in the Bilateral Investment Treaty between the Netherlands and Slovakia was not compatible with EU law.




Published: 18 September 2018