A ruling of the Constitutional Court of Ukraine of 13 June 2019 declared several provisions of the law establishing the national energy regulatory authority, NEURC, in violation of the country’s constitution. Besides concerns related to the dismissal and appointment of commissioners by the President of Ukraine, the Constitutional Court in particular held that NEURC’s status as an independent body is unconstitutional.
In the view of the justices, the constitution requires the regulator to be subordinated to the Cabinet of Ministers, as its functions are essentially of an executive nature. This contradicts the Third Energy Package to which Ukraine is bound by its accession to the Energy Community. The Grand Chamber of the Constitutional Court does not address the impact of these rules. Yet, the independence of regulators from any other private or public body is a key pillar of European energy legislation. Independence from public bodies like the Government is of particular importance in Ukraine where public ownership in the regulated energy sector is widespread and important decisions such as the unbundling of gas and electricity incumbents is subject to commercial and political interests. As the Secretariat reported in 2018, NEURC has been subject to serious political interventions in the past, even without its constitutional status being challenged. A more recent assessment of the Secretariat showed that autonomy guarantees enshrined in the law on establishing the national energy regulatory authority only recently started to bear fruit.
The court has set a deadline of 31 December 2019 for the correction of the legal shortcomings. After this date, the affected clauses of the law on NEURC will be invalid and NEURC will operate without a legal basis. If decisionmakers in Ukraine do not manage to resolve this issue quickly, the foundations of the country’s energy sectors and their continuous reform in line with European rules are at stake.