Luxembourg Court's Opal Decision A Setback for Poland: Update

(Updating with comment from PGNiG's law firm in final two paras)

The president of the General Court of the European Union in Luxembourg has allowed Gazprom to use up to 90% of the Opal pipeline in a court ruling announced July 21.

However it is an interim ruling and although lawyers for Polish state-controlled PGNiG said the decision represents a temporary setback in PGNiG’s bid to have the 2016 Opal exemption decision set aside, the final decision is still a few years off. 

The European Commission decided in October 2016 that the ceiling of 50% was no longer necessary and lifted the limit to 80%-90%. But Polish gas incumbent PGNiG and its German subsidiary PGNiG Supply & Trading successfully appealed this decision, saying it violated key principles of the European Union and its normative acts.

The decision was legally suspended December 23, pending a legal examination of the case, meaning the limit has been lowered to 50% since the start of February. 

The court has now found against Poland, it said July 21, as it did not believe the Polish company would suffer "serious and irreparable harm before the decision in the main proceedings is made." 

The court said there are two contracts between Gazprom and Poland: a transit contract for gas through the Polish section of the Yamal-Europe pipeline until 2020 and a contract concluded in 1996 with PGNiG for deliveries of natural gas until the end of 2022.

"The use of the transport capacity of the Polish section of the Yamal-Europe pipeline and Gazprom’s deliveries to the Polish market are, prima facie, guaranteed until the abovementioned dates," it said. So any alleged harm could occur at the earliest only on expiry of those contracts.

In the light of the average duration of proceedings before the EU General Court, the judgments on the substance in the present cases will probably be delivered during 2019, the court said. PGNiG and the German subsidiary PGNiG Supply & Trading "have failed to adduce sound evidence that they are unable to await the outcome of the proceedings in the main actions without being exposed to serious and irreparable harm," it said.

"Since the harm alleged is not immediate, the President of the General Court finds that the requirement of urgency is not met. In those circumstances, he rejects the applications for a stay of execution of the contested decision and lifts the stay of execution ordered on 23 December 2016."

Dechert's antitrust/competition department, which has been part of the team acting for PGNiG, said the decision means that Gazprom will be able to participate in the March 2018 annual auctions for fixed and interruptible capacity – assuming the General Court does not issue its final judgement in early February 2018 – which will enable it to book capacity on the Opal pipeline for the next 15 years. Gazprom will also be able to participate in daily, monthly and quarterly auctions which will allow it to secure 80-90% of the pipeline capacity on a short-term basis. 

"We will see a return to the situation in early January 2017, that is, a significant increase in the utilisation of the Opal pipeline and a corresponding reduction of gas flows via the Brotherhood pipeline, the Ukraine transit route," said senior associate Adam Kidane in a comment emailed to NGW.

William Powell