Successfully settled disputes

The dispute concerned the percentage in share capital of the Government on the one hand, and of Makpetrol on the other, in GA-MA, a company operating as TSO between the North-Macedonian/Bulgarian border and Skopje.  

This dispute had been paralyzing the gas sector development in North Macedonia for the past 22 years. The resolution of the dispute is also important in the context of the gas TSO unbundling, an obligation of North Macedonia under Energy Community law. Successful unbundling could not happen as long as the issue of the ownership in GA-MA was not solved, as Makpetrol performs also supply and trade of natural gas.

During a mediation session conducted in Vienna in November 2019, the parties agreed to a 50% - 50% ownership in GA-MA. The Government further agreed to purchase Makpetrol’s share in GA-MA. Both parties agreed to discontinue all open litigation procedures in front of national courts.

The implementation of the settlement by both parties still remains to be accomplished.

The dispute was mediated by Dirk Buschle, Chair of the Dispute Resolution and Negotiation Center.

The dispute concerned a series of amendments to the Gas Transmission Code (GTS Code) adopted by the National Energy and Utilities Regulatory Commission (NEURC). Seven problematic issues in the GTS Code represented the core of the dispute: Financial guarantees, Trade notifications, Transport service termination, Capacity allocation agreement, Balancing groups, Balancing neutrality and Unauthorized offtake of gas.

The first six issues enumerated above have been extensively discussed between the parties and the Secretariat during a series of meetings between June July 2018 and May February 2019. The solutions found and agreed upon were incorporated into the several Amendments to the GTS Code, and other relevant secondary acts, such as Standard transmission agreement and the Methodology on natural gas distribution tariffs. Ukraine’s gas transmission system started to be balanced on a daily basis as of 1 March 2019 and the new regime provided increased system efficiency, thus delivering benefits to Ukrainian energy consumers.

However, daily balancing in physical and commercial terms could not brought fulfilling the financial obligations in time and in full scope. Thus, the Unauthorized offtake of gas remained as unsolved issue and causing problems further. It has to be noted that solving of unauthorized offtake of gas is related to issues and activities outside the scope of the GTS Code (such as the public service obligation decree, which will expire in May 2020). This led to the decision by the Dispute Resolution and Negotiation Centre to close Dispute 2/2018, and to discuss the remaining issue, if not as a new case, in a different forum, with the appropriate stakeholders.

Dispute 2/2018 was mediated by Ms Karolina Čegir, Gas Expert in the Energy Community Secretariat.

The Energy Community Secretariat agreed on the application by the principles of mutual recognition of licenses and reciprocity with the Energy Regulatory Office in Kosovo*, ERO. Based on the understanding reached with ERO, German based market participant, Statkraft, can become participant in the wholesale electricity market in Kosovo without requiring a license.

Deputy Director Dirk Buschle said: "ERO took a fair and responsible decision on the basis of Kosovo* and Energy Community legislation. This precedence should open the door to other market participants from EU Member States and Contracting Parties of Energy Community to register as market participants and perform their activity in the electricity market in Kosovo* without a local establishment requirement. The Secretariat is currently working on proposals for rules which will extend the principles of reciprocity and mutual recognition to all countries in the Title III region."

The dispute arose out of incompliance with Energy Community law of two environmental permits of two thermal power plants in the Federation of Bosnia and Herzegovina (TPP Banovići and TPP Tuzla). The permits were initially subject to complaints filed with the Energy Community Secretariat (Cases ECS-16/16 and ECS-17/16). According to the complainant, the environmental permits were in breach of the provisions of Directive 85/337/EEC on environmental impact assessment and Directive 2010/75/EU on industrial emissions. In the Secretariat’s preliminary assessment, the two environmental permits caused legal uncertainty for developers, as the emission limit values in the domestic legislation were lower than the ones in the Energy Community acquis. Meeting only the emission limit values of the domestic legislation would not be sufficient to operate a plant accordingly and would result in non-compliance with Directive 2010/75/EU and Directive 85/337/EEC.

Upon the preliminary assessment of the complaint, the Secretariat invited representatives of the Ministry to mediation within the Energy Community Secretariat’s Dispute Resolution and Mediation Centre, in accordance with Title III of the Procedural Act 2016/03/ECS of the Energy Community Secretariat (“Negotiations and Mediation in Dispute Settlement Procedures”). The authorities of the Federation of Bosnia and Herzegovina agreed to the mediation proposal by the Secretariat.

The mediation session, facilitated by Ms Anne-Karin Grill from the Energy Community Secretariat’s Panel of Mediators, took place on 27 July 2017 in Vienna. A settlement agreement was signed on the same day. The Ministry of Environment and Tourism of the Federation of Bosnia and Herzegovina agreed to change the two permits so that they comply with the requirements on industrial emissions for new plants.  The Energy Community Secretariat agreed not to initiate infringement proceedings related to the environmental permits of TPP Banovići and TPP Tuzla 7 as long as the adoption of the changes to the environmental permits was pending.  Once the changes described above were adopted, the Energy Community Secretariat closed Cases ECS-16/16 and ECS-17/16.

This was the first mediation conducted by the Energy Community Secretariat’s Dispute Resolution and Negotiation Centre as part of the Energy Community dispute settlement procedure. 

The dispute between Gas Natural Fenosa, Moldova’s largest supplier and distributor of electricity, and the Government of Moldova arose from deviations between the costs of purchasing electricity and the regulated electricity tariff. Following the initiation of ICSID arbitration proceedings by Gas Natural Fenosa against Moldova, Deputy Director Dirk Buschle was appointed by both parties as facilitator of the negotiations in February 2015.  The negotiations took place in Chiṣinău.

The settlement agreement signed on 3 June 2016 between Gas Natural Fenosa and the Government of Moldova was the first step to bring to an end a months-long dispute. 

Following the signature of the settlement agreement, Deputy Director Dirk Buschle said: "On behalf of the Energy Community Secretariat and in my capacity as facilitator of the negotiations between Moldova and Gas Natural Fenosa, I highly welcome the agreement between both parties signed on Friday evening. The agreement will help stabilize a sector which suffers from a systemic vulnerability unmatched in Europe and has witnessed financial turbulences in the past few years. Not acting upon the resulting deviations in the electricity tariff would have led to protracted legal disputes and negatively affected Moldova’s reputation as an investment destination and a reliable partner for international organizations."

"I felicitate in particular the Government which had the courage to change the negative path of action and open the possibility for further reform and support. With today’s agreement, Moldova has shown that it takes its membership in the Energy Community seriously not only in the letter but also in its spirit. The ball is now with the regulatory authority ANRE to implement today’s agreement and with the international community to help ending the country’s dependence in its electricity and gas supply and infrastructure.”

The full implementation of the settlement agreement followed shortly in October 2016.  Fulfilling the terms of the settlement agreement, Gas Natural Fenosa reached amicable agreements with state power companies and the Moldovan energy regulator published a mechanism for the recovery of the tariff deficit.  The regulator will have to adopt increased tariffs as of 1 January 2017, so that the tariff deviations can be effectively recovered.

In a letter to the Secretariat, Jose Luis Gomez Pascual, President and Country Manager of Gas Natural Fenosa Moldova, thanked the Secretariat for “providing a common ground for the development of options to solve this major issue that threatened to put the electricity system of Moldova on the verge of extensive power outages.”

December 2019 Update: The historical tariff arrears have been recovered and there is no outstanding past tariff debt. The Agreement signed on June 3, 2016 between the Minister of Economy and Infrastructure of Moldova and Gas Natural Fenosa (now, Premier Energy Moldova) has been fully honored by the energy authorities of Moldova.

Under the auspices of the Energy Community Secretariat and the European Commission, representatives of the electricity transmission system operators of Serbia (EMS) and of Kosovo* (KOSTT) agreed on the terms of an agreement on principles for their future cooperation in Vienna on 10 December 2013. The agreement, which has been proposed to the respective authorities for signature, dealt with operational and commercial aspects in the relations of both companies.

On 12 February 2014, a Framework Agreement governing the operational and commercial relations between EMS and KOSTT was signed by both companies’ general managers. The legally-binding Agreement constituted a milestone in normalizing the relations between the two electricity system operators. 

The negotiations of the Framework Agreement were facilitated by the Secretariat’s Deputy Director Dirk Buschle and his team together with experts from the European Commission. Director Janez Kopač of the Secretariat expressed his satisfaction about the signature: “This Agreement is not only of bilateral relevance. It will unblock many serious obstacles which so far have prevented regional integration of the electricity markets in South East Europe.” 

Later on, on 16 September 2014, KOSTT and EMS signed a so-called Inter-TSO Agreement on network and system operation management. The Agreement, negotiated under the auspices of the Secretariat and with the support of the European Commission, brings to an end a controversy between the two operators on their bilateral relations dating back to the beginning of this century. The Inter-TSO Agreement and its technical annexes implement the operational part of the Framework Agreement signed by both parties in Vienna earlier that year. 

“Today’s signature is a milestone in the cooperation not only between two companies but also for the normalisation between these Contracting Parties,” said Deputy Director Dirk Buschle. Director Janez Kopač added: “Both companies and governments have shown great responsibility and opened the path for better regional integration of the South East European electricity markets. We hope to build on this encouraging development in the near future with fostering the Coordinated Auction Office and other projects of regional importance.”

These next steps involve the finalisation of further agreements between EMS and KOSTT, covering the compensation for transit flows and congestion revenues for this year, as well as discussions about KOSTT becoming a member of the European Network of Transmission System Operators (ENTSO-E). 

The Settlement Agreement signed in Vienna ends the 18-month long dispute between the Republic of Albania and the Czech energy utility ČEZ following the Albanian regulator’s decision of 21 Jan 2013 to revoke the license of CEZ Shpërndarje. Following the initiation of arbitration proceedings by ČEZ in 2013, Deputy Director Dirk Buschle of the Secretariat was appointed by both parties as facilitator of the negotiations, which have taken place at the Secretariat’s premises as of Jan 2014. 

Statement by Deputy Director Dirk Buschle: "On behalf of the Energy Community Secretariat and in my personal capacity as mediator of the negotiations between Albania and ČEZ, I highly welcome the Settlement Agreement between both parties signed yesterday. I am deeply convinced that entering into and concluding these negotiations are in the best interest of Albania and its electricity consumers".

“Years of neglecting the energy sector left the Albanian energy sector in a very bad shape, with an unsustainably high share of electricity not paid for, the State-owned companies in serious financial difficulties, and investor confidence alarmingly low. In this situation, settling the dispute with ČEZ was the only sensible move. Costly arbitration proceedings with an unclear outcome would have created a long period of uncertainty and instability. By preventing the urgently needed deep reforms, they would have taken the whole energy sector hostage and created liabilities far higher than what was settled by yesterday’s agreement".

"From many talks during the recent months, I know that private investors and public institutions alike would have been more than reluctant to support a country with these open legal and financial liabilities. Stability and the good reputation of Albania’s energy sector needed to be restored as an indispensable first step to turn the sector around. For this reason, the Energy Community so actively supported the negotiations during the last six months. It will continue to do so during the upcoming reforms which can now begin. I am very pleased that in concluding these negotiations the Albanian Government set the long-term interests of the country above the short-term desire for legal confrontation.”