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Journal of Energy & Natural Resources Law
ISSN: 0264-6811 (Print) 2376-4538 (Online) Journal homepage: https://www.tandfonline.com/loi/rnrl20
A common EU framework regulating import
pipelines for gas? Exploring the Commission's
proposal to amend the 2009 Gas Directive
Leigh Hancher & Anna Marhold
To cite this article:
Leigh Hancher & Anna Marhold (2019): A common EU framework regulating
import pipelines for gas? Exploring the Commission's proposal to amend the 2009 Gas Directive,
Journal of Energy & Natural Resources Law, DOI: 10.1080/02646811.2019.1569873
To link to this article: https://doi.org/10.1080/02646811.2019.1569873
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Journal of Energy & Natural Resources Law, 2019
A common EU framework regulating import pipelines
for gas? Exploring the Commission’s proposal to amend
the 2009 Gas Directive
Leigh Hancher, Professor of European Law, Tilburg Law and Economics Centre, Tilburg
University and Director, Energy Union Law at the Florence School of Regulation.
Anna Marhold, Assistant Professor, Grotius Centre for
International Legal Studies, Leiden Law School. Email: firstname.lastname@example.org
(Received 13 August 2018; ﬁnal version received 17 December 2018)
This contribution investigates the form and content of a new and updated
European Union (EU) legal framework intended to regulate third-country
import pipelines for gas, including the ‘upstream’ component of the Nord
Stream 2 pipeline. The article will ﬁrst set the scene and examine the essential
features of the current legal regime regulating import pipelines in the EU and
explore its extraterritorial dimension, including the discussion of the allocation
of competences between the EU and its Member States. Subsequently, the
paper will explore the newly proposed EU legal framework for import
pipelines as set out in the Commission’s proposal to amend the 2009 Gas
Directive. It will focus on three crucial, interlinked dimensions: (1) the
proposed form of such legislation; (2) the applicability of the framework to
existing and new pipelines entering the EU (scope); and (3) a potential
derogation and exemption regime for import pipelines.
Keywords: gas; European Union; Nord Stream; Gas Directive; extraterritorial effect
Recent analysis by the Legal Services of both the European Commission and the Euro-
pean Council have concluded that current European Union legislation on the internal
market for gas (that is, the Gas Directive 2009/73/EC and Regulation 715/2009, as
well as the relevant network codes) apparently cannot apply to third-country sub-sea
import pipelines for gas, such as the planned Nord Stream 2.1
The alleged legal uncertainty as to the appropriate regulatory framework for such
pipelines has triggered the Commission to explore various options to apply common
Council of the European Union, ‘Opinion of the Legal Service, Recommendation for a Council Decision
authorising the opening of negotiations on an agreement between the European Union and the Russian
Federation on the operation of the Nord Stream 2 pipeline – Allocation of competences and related legal
issues’ (12590/17, Brussels, 27 September 2017); Directive 2009/73/EC of the European Parliament and
of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and
repealing Directive 2003/55/EC  OJ L211/94 (hereinafter the Gas Directive); Regulation (EC)
No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for
access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 
© 2019 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution-Non-
permits non-commercial re-use, distribution, and reproduction in any medium, provided the original
work is properly cited, and is not altered, transformed, or built upon in any way.
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L Hancher and A Marhold
rules to gas pipelines entering the EU’s internal gas market.2
The underlying objective
is claimed as being to ensure that all major pipelines in the EU and entering EU territory
are operated under the same degree of transparency, are accessible to other operators
and are operated efﬁciently. In November 2017, the Commission proposed what is
now providing to be legally as well as politically controversial amendments to the
current Gas Directive.
This contribution will investigate the form and content of a new and updated EU
legal framework aimed at regulating third-country import (ie, external) pipelines for
gas and, in particular, the controversial Nord Stream 2 pipeline bringing gas from
Russia to Germany.3
The proposed amendments launched in November 2017 appear
to be primarily targeted at regulating the ‘upstream’ component of this pipeline.4
The article will ﬁrst set the scene and examine the essential features of the current
legal regime regulating transmission as well as import pipelines in the EU.
Subsequently, the article examines the Commission’s proposed amendment to the
and the subsequent amendments to it as put forward by the European Par-
liament and the Presidency of the Council. This section will focus on three crucial, inter-
linked dimensions: the proposed form of such legislation (Section 2); the applicability of
the framework to existing and new pipelines entering the EU (scope) (Section 3); and a
potential derogation and exemption regime for import pipelines (Section 4).
The following section will then explore the extraterritorial dimension, including a
discussion of the allocation of competences between the EU and its Member States
in concluding intergovernmental agreements (IGAs) regulating import pipelines in
the future, if the proposed amendments are indeed adopted. It will conclude that the
Commission proposal could lead to a major transfer of competences to the EU.
The article aims to provide insight and clarity into the planned updated EU legal
regime regulating import pipelines for gas, including an improved understanding of
its scope and potentially contentious issues. It will assess whether the newly proposed
regime will provide for a truly comprehensive EU common framework regulating
import pipelines and thereby contribute to a better functioning EU internal energy
market and increased security of supply in the EU.
The current EU regime for pipelines for gas
Overview of key legislation
The current legal regime for the regulation of gas pipelines is known as the ‘Third
Energy Package’ (TEP) of internal gas market rules. The cornerstones of the regime
See European Commission, ‘Questions and Answers on the Commission Proposal to Amend the Gas
Directive (2009/73/EC)’ (Fact Sheet, 8 November 2017) http://europa.eu/rapid/press-release_MEMO-
accessed 15 December 2018.
Kai-Olaf Lang and Kirsten Westphal explain that the ‘onshore’ component is fully regulated according
to EU internal market law; see ‘Nord Stream 2 – A Political and Economic Contextualisation’ (2017)
SWP Research Paper No 3 (March 2017).
K Talus, ‘Discriminatory Nature of the Proposed Changes to the Gas Market Directive – Extension to
External Pipelines or Only One of Them?’ (2018) Utilities Law Review (forthcoming), analyses the
potential discriminatory impact of the draft amendments on the Nord Stream 2 project in detail.
European Commission, ‘Proposal for a Directive of the European Parliament and of the Council amend-
ing Directive 2009/73/EC concerning common rules for the internal market in natural gas’ COM(2017)
660 ﬁnal, 2017/0294 (COD) (hereinafter: the Commission proposal).
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are third-party access, ownership unbundling and market supervision.6
The Gas Direc-
tive 2009/73 builds on two previous directives. The ﬁrst Gas Directive of 1998 was the
initial and very tentative step towards the adoption of a harmonised set of rules for the
EU’s gas transmission infrastructure. Member States could elect to require the owners
of gas pipelines to allow third parties to use their pipelines under regulated conditions
(regulated third-party access (TPA)) or to require them to negotiate individual contracts
with third parties (negotiated TPA). Notably, that measure did not contain any pro-
visions on interconnectors between Member States although it did exclude ‘upstream
pipelines’ from the limited access requirements for onshore pipelines. The second
Gas Directive of 2003, however, extended the harmonisation of access regulation,
and at the same time provided for the Member State to grant an exemption from the
standard regime – that is, mandatory TPA and regulated tariffs – for interconnectors.7
A limited exemption for new infrastructure – that is, interconnectors, liqueﬁed natural
gas (LNG) and storage facilities – was available if certain conditions were met (inter
alia, when proven not to be detrimental to competition, the functioning of the market
and security of supply in the EU). The 2003 Directive also introduced a requirement
that transmission functions should be legally unbundled from other functions.
The Gas Directive (2009/73/EC), part of the TEP, and adopted prior to the adoption
of the new title on energy in the Treaty of Lisbon, remains the most important second-
ary legislation regulating the internal market for gas to date.8
This measure has further
ﬂeshed out the conditions of regulated TPA and regulatory oversight but in order to
ensure effective competition in the EU’s gas market, it introduced stricter unbundling
requirements. In principle, transmission systems that were not part of a vertically inte-
grated undertaking (VIU) before the entry into force of the Gas Directive must be ‘own-
ership unbundled’ as required by its Article 9. Moreover, the Gas Directive contains
rules on the certiﬁcation of transmission system operators (TSOs). EU Member
States must ensure that their TSOs have been properly unbundled in accordance with
one of the four models provided for in the Gas Directive. Article 11 provides for a
speciﬁc certiﬁcation procedure for the ownership/control of European transmission
system operators by a third-country person or persons.9
The exemption regime – now contained in Article 36 – was maintained and
extended to Article 9 (unbundling), but not Articles 10 and 11 (certiﬁcation). The
role of the Commission was strengthened so that it can now veto national decisions
or impose binding conditions on the exemption. The deﬁnition of an interconnector
Gas Directive (n 1) Art 32 (Third-Party Access), Arts 9, 15, 26 and 31 (Unbundling), Chapter VII
(Market Supervision); also see Kim Talus, Introduction to EU Energy Law (OUP 2016) 15.
For a detailed discussion, see further Leigh Hancher and Francesco Maria Salerno, ‘Energy Policy after
Lisbon’ in Andrea Biondi, Piet Eckhout and Stefanie Ripley (eds), EU Law after Lisbon (OUP 2012).
The Gas Directive (n 1); other relevant secondary legislation consists of, eg, the Security of Gas Supply
Regulation, Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October
2017 concerning measures to safeguard the security of gas supply and repealing regulation (EU) No 994/
2010  OJ L280/1; the Capacity Allocation Regulation, Commission Regulation (EU) 2016/1719
of 26 September 2016 establishing a guideline on forward capacity allocation  OJ L259/42; Regu-
lation 715/2009 (n 1) and the relevant network codes, see European Commission, ‘Gas Network Codes’https://ec.europa.eu/energy/en/topics/markets-and-consumers/wholesale-market/gas-network-codes
accessed 15 December 2018.
Gas Directive (n 1) Art 11 (Certiﬁcation in relation to third countries); the scope of Art 11 relates to the
ownership and/or control of transmission system operators by owners from third countries.
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L Hancher and A Marhold
remained unchanged (Article 2(17)). Upstream pipelines remained subject to a lighter
regime (now renumbered as Article 34 in the Gas Directive).
The Commission proposal in brief
On 1 November 2017, the European Commission presented a proposal for a Directive10
of the European Parliament and the Council amending the existing Gas Directive 2009/
73 on common rules for the internal gas market11
(hereinafter the ‘Commission propo-
sal’) to apply ‘the substantive rules applicable to gas transmission pipelines connecting
two or more Member States to gas pipelines to and from third countries’.12
mission proposal seeks to apply many of the Gas Directive’s key provisions to pipelines
entering the EU from third countries and affects both existing and future pipelines, up to
the border of EU ‘jurisdiction’ (including territorial waters and exclusive economic
zones). If the Commission proposal is adopted, Gas Directive rules on third-party
access, tariff regulation, ownership unbundling and transparency would fully apply
to pipelines between the EU and third countries.
In choosing to update Gas Directive 2009/73 by way of a ‘minor amendment’, the
Commission was no doubt aware that the latter route would immediately raise political
controversy as well complex legal issues.13
The Commission’s stated objective is to create legal certainty as to the applicability of
the principal components of the internal gas market regime to various categories of pipe-
line. It follows that it is preferable to amend the existing legal framework for ‘EU-internal
pipelines’ and to provide legal clarity on the application of the rules on unbundling, trans-
third-party access and regulated tariffs to all ‘external’ pipelines to and from
third countries as opposed to dealing with such pipelines on a case-by-case basis.
The Commission proposal would result in the application of the Gas Directive in its
entirety as well as related legal acts including the Gas Regulation 715/2009 and insofar
as relevant, the network codes15
and guidelines adopted under the Gas Directive and
10 The Commission proposal (n 5).
11 The Gas Directive (n 1), Art 3(2) of the Gas Regulation 715/2009 cross-refers to the deﬁnition in Art 2 of
the Gas Directive.
12 We observe that this is similar to the approach proposed for electricity interconnectors in the revised
Electricity Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 con-
cerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, OJ L
211, 14.8.2009, which is currently being negotiated as part of the Commission’s Clean Energy Package.
13 See, however, European Commission, ‘Commission Staff Working Document, Assessing the amend-
ments to Directive 2009/73/EC setting out rules for gas pipelines connecting the European Union
with third countries’ SWD(2017) 368 ﬁnal. The targeted nature of the Commission proposal was
used as justiﬁcation for the choice not to pursue a full impact assessment. However, the latter decision
may also reﬂect the sudden urgency attached to a legislative proposal that was not foreseen either in the
Commission’s energy union strategy of February 2015 or in subsequent updates on the state of energy
union. In fact, the legislative proposal was ﬁrst mentioned in Commission President Juncker’s 2017 State
of the Union address to the Parliament and Council, see European Commission Speech, President Jean-
Claude Juncker’s State of the Union Address 2017, Brussels, 13 September 2017 http://europa.eu/rapid/
14 A lack of transparency in the operation of pipelines to and from third countries can be a risk factor from a
security of supply perspective. Therefore, it is important to ensure that information on the operation and
maintenance of important infrastructure is made available to the market and can be used by relevant
national and EU authorities.
15 Network codes, to a large extent, do not apply to pipelines to and from third countries. This is due to
speciﬁc provisions clarifying their scope. By way of example, Art 2(1) of the Network Code on capacity
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Regulation, to pipelines (also referred to as ‘transmission lines’) to and from third
countries. The Commission proposal would in principle cover both existing and
future pipelines, but only up to the border of EU jurisdiction, unless (i) an exemption
has been applied for in the case of new pipelines; or (ii) a derogation had been granted
for existing pipeline – also referred to as ‘existing import infrastructure’. Existing pipe-
lines could be granted a derogation from the rules of the Gas Directive by the Member
State where the ﬁrst interconnection point is located (Article 49(9)). Such derogations
must be limited in time and must not be detrimental to the competitive functioning of
the EU. Major new infrastructure linking the EU and a third country would be eligible
for an exemption provided that it meets the required conditions (Article 36).
Shared internal and external competence for energy
Before turning to a further examination of the Commission proposal and its reception in
the European Parliament and in the Council, it is important to recall the allocation of com-
petences between the EU and its Member States on energy matters. The Lisbon Treaty
provides the EU for the ﬁrst time with an energy-speciﬁc competence as the basis for
EU-wide energy policy and legislation. This shared competence ﬂows from Article 4
(2)(i) of the Treaty on the Functioning of the European Union (TFEU).16
of the TFEU, taken up in Title XXI, sets out its scope.17
Article 194(1) is now the
legal basis for energy legislation and the Commission proposal is based on this Article.
The shared competence on the area of energy ﬂows from Article 4(2)(i) of the
As this is what is known as a ‘complementary’ competence, both the
Member States and the EU can develop national and, respectively, regional energy
policy in parallel. However, pursuant to Article 4(3) of the Treaty on European
Union (TEU), the Member States and the EU have a mutual duty to sincerely cooperate
with each other in this endeavour. This implies that although the EU and its Member
States may operate and develop energy policy in parallel, they should cooperate and
coordinate with one another and not pursue policies that are contrary to their respective
allocation mechanisms (Commission Regulation (EU) 2017/459 of 16 March 2017 establishing a
network code on capacity allocation mechanisms in gas transmission systems and repealing Regulation
(EU) No 984/2013 (Text with EEA relevance.) C/2017/1660, OJ L 72, 17.3.2017, p. 1–28) expressly
states that entry and exit points to third countries are only subject to its requirements where this has
been decided by the relevant national regulatory authority. The non-application of this Network Code
automatically results in non-application of major parts of Commission Regulation (EU) 2017/460 of
16 March 2017 establishing a network code on harmonised transmission tariff structures for gas (Text
with EEA relevance.) C/2017/1657, OJ L 72, 17.3.2017, p. 29-56 (see Art 2(1) thereof) although
certain provisions (notably Chapters I, II and IV) of this Commission Regulation do apply. The proposed
amendments will therefore only have a limited impact on the applicability of network codes.
16 Article 4(2) of the Consolidated Version of the Treaty on the Functioning of the European Union 
OJ C115/47 (hereinafter: TFEU).
17 TFEU (n 16) Art 194: TFEU, Art 194(1) outlines the objectives of European energy policy: the EU shall
aim to (a) ensure the functioning of the energy market; (b) ensure the security of supply of the EU; (c)
promote energy efﬁciency and the development of renewables; and (d) promote the interconnection of
energy networks; Art 194(2) subsequently determines that the European Parliament and the Council can
establish the measures necessary to achieve these objectives.
18 TFEU (n 16) Art 4(2).
19 Article 4(3) of the Consolidated Version of the Treaty on European Union  OJ C83/01 (hereinafter:
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L Hancher and A Marhold
The EU acts externally to the extent it has competence to act internally, as this
capacity is governed by the principle of conferral (Article 5 of the TFEU). This
Article states that the EU shall act within the powers conferred on it by the MemberStates.20
Currently, Member States have jurisdiction to regulate the operation of
third-country import pipelines to which Gas Directive 2009/73/EC is not applicable.
They retain the competence to conclude international agreements to regulate the oper-
ation of such pipelines following Article 2(2) of the TFEU.21
The concept of ‘territory’
It is also important to understand what is meant by the legal concept of ‘territory’ in the
debate on the scope of the Gas Directive, the Commission’s request for a mandate to
negotiate an IGA with Russia (see section 3.5 below), as well as the proposed amend-
ments to the Gas Directive. Generally speaking, in addition to its land territory, the ter-
ritorial sovereignty of a state is understood to extend to its internal waters, the territorial
sea adjacent to its coast (and, where it concerns an archipelagic state, to its archipelagic
waters), as well as the air space above this territory.22
A coastal state, moreover, has
rights to certain activities beyond its territory, such as the exploration and exploitation
of natural resources in its exclusive economic zone (EEZ) and on its continental shelf.23
While the EEZs are not strictly territorial, and these areas are outside the territory of a
state, they are relevant in connection with certain economic activities of a state.24
EU is, of course, not a state, but an international organisation fostering regional econ-
omic integration, made up of its Member States. This naturally raises the issue of what
can be considered EU territory and to what extent EU law, and the Gas Directive in par-
ticular, can apply extraterritorially.25
20 TFEU (n 16) Art 5; the EU must do so in accordance with Chapter 1 of Title V of the Treaty on European
Union, TFEU Art 205. See, on the existence of EU external competence in particular, Bart Van Vooren
and Ramses A Wessel ‘Existence of EU External Competence’ in Bart Van Vooren and Ramses A
Wessel, EU External Relations Law: Texts, Cases and Materials (Cambridge University Press 2014).
21 NB: there was no formal IGA between Germany/EU and Russia for Nord Stream 1, perhaps owing to the
different political landscape. See Lang and Westphal (n 3) 13.
22 BH Oxman, ‘Jurisdiction of States’, para 13, Max Planck Encyclopedia of Public International Law
accessed 15 December 2018.
23 Oxman (n 22) para 14. The EEZ is deﬁned as a maritime zone beyond and adjacent to the territorial sea of
a state, extending up to 200 nautical miles from the baseline of a coastal state where the coastal state has
sovereign rights over the living and non-living resources of the suprajacent waters and its seabed and
subsoil, see Arts 56 and 57 of the United Nations Convention on the Law of the Sea (UNCLOS) 10
December 1982, 1833 UNTS 397 and D Nelson, ‘Exclusive Economic Zone’, Max Planck Encyclopedia
of Public International Law http://opil.ouplaw.com/home/EPIL
accessed 15 December 2018.
24 Oxman (n 22) para 14.
25 See on this issue, and especially on the notion of ‘extraterritorial extension’ of EU law, Joanne Scott,
‘The New EU Extraterritoriality’ (2014) 51 Common Market Law Review 1343, 1355–64; TEU (n
19) Art 52, as further speciﬁed in TFEU (n 16) Art 355 provides that the Treaties apply to Member
States, it is accepted that the rule-making authority of the EU also extends to matters over which the
Member States have sovereignty or jurisdiction under international law, including in maritime areas,
Judgment of 24 November 1993, Case C–405/92 Etablissements Armand Mondiet SA v Armement
Islais SARL, EU:C:1993:906, para 12, see Council of the European Union, ‘Opinion of the Legal
Service, Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in
natural gas and repealing Directive 2003/55/EC – Compatibility with UNCLOS’ (6738/8, 1 March
2018) 2017/0284 (COD) 2, para 8.
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Does the current regime extend to import or offshore pipelines?
No uniform legal framework
In this section we explain that the Gas Directive 2009 itself does not provide an explicit
answer to the question to what extent external – upstream, offshore and transmission –
pipelines from third countries are within its scope (and are therefore subject, if at all, to,
inter alia, unbundling and third-party access). The same applies to the question as to
what exactly should be understood by the term ‘import pipelines’ or ‘import infrastruc-
ture’, as these terms have only become current relatively recently.26
The Gas Directive 2009 does not provide for a uniform legal framework with regard
to so-called ‘import pipelines’, nor does it make use of that term. The Gas Directive
remains unclear regarding the potential extraterritorial application of EU law. It is
silent on whether it covers pipelines within the EU’s territory only, or also extends
its application to pipelines that enter the EU from a third country. Article 2(17)
deﬁnes an ‘interconnector’ pipeline as a ‘transmission line which crosses or spans a
border between Member States for the sole purpose of connecting the national trans-
mission systems of those Member States’, without any further elaboration on itsscope.27
‘Upstream pipelines and networks’ are deﬁned as pipelines and/or networks
that convey natural gas from a production site to a processing plant or terminal, and
it would appear irrelevant whether or not they should originate in the EU (or be
either onshore or offshore) to be covered by the Gas Directive.28
The scope of the current exemption for new infrastructure
As the exemption procedure in Article 36 of the Gas Directive 2009 is restricted to
‘interconnectors’ between Member States as opposed to transmission lines that cross
the territory of a third country, import or ‘external’ pipelines cannot beneﬁt from an
Article 36 exemption. It is argued thus that the EU legislature cannot have intended
to apply the Gas Directive to such pipelines, otherwise the inequitable situation
would arise that import pipelines would be subject to the full burden of liberalisation
without being able to obtain relief via Article 36. It would also result in discrimination
between import and non-import pipelines, which again it can be argued cannot have
been the intention of the legislature.29
At the same time, other commentators have for-
cibly argued that
Drawing upon recital 35 and language versions which indicate that the classes of infra-
structure capable of being subject to an exemption under Article 36 are not exhaustive, it
can be compellingly argued that the Commission could apply the directive to importpipelines.30
26 See, eg, European Commission Fact Sheet (n 2).
27 Gas Directive (n 1) Art 2(17) (Deﬁnitions). However, even here, it could be argued that, eg, Nord Stream
1, which runs from Russia through EU territorial waters could technically qualify as an ‘interconnector’
in the sense of the Article, as the pipeline does cross territorial seas and EEZs of several EU Member
States before it lands in Greifswald, Germany.
28 Gas Directive (n 1) Art 2(2).
29 Council, Opinion of the Legal Service (n 25) para 42.
30 Alan Riley, ‘A Pipeline Too Far? EU Law Obstacles to Nord Stream 2’ (31 January 2018) International
Energy Law Review (March 2018) 14 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3114202
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L Hancher and A Marhold
With the exception of the Nord Stream 2 project there appears to have been little
concern in the past as to the (non-) application of EU law to import pipelines or
import infrastructure. Existing import pipelines (including the Transmed, Medgaz,
Greenstream or the planned Galsi pipeline) may be governed by IGAs or contractual
agreements which may or may not incorporate elements of the EU energy ‘acquis’,
depending on the individual agreements. That is a matter for the individual parties to
Pipeline projects such as TAP and the (now abandoned) Nabucco are
considered as internal pipelines – even if they transport gas from third countries they
connect the transmission systems of two or more Member States.32
Nord Stream 2 – an upstream or external sub-sea pipeline?
Why then the sudden impetus to apply the TEP to external pipelines? Nord Stream 2
(NS2) is owned by Gazprom (and several European gas supply companies have ﬁnan-
cial interests in it). It will, if completed, extend over 1,200 kilometres across the EEZ of
Finland and Sweden as well as the EEZ and territorial waters of Denmark and Germany.
It will connect to the German onshore pipeline system at an exit point in Lubmin near
Greifswald and would double the capacity of the current pipeline from Russia to
This project has proved controversial not least because it may have an
adverse impact on the volumes of Russian gas currently transited through Ukraine to
several Eastern European Member States, who are almost entirely dependent on
Russian gas supply.34
Furthermore, Gazprom, as the largest exporter of natural gas
to Europe, has been the subject of a long-running investigation by the Commission’s
services for alleged misuse of its dominant position on signiﬁcant parts of the European
gas market. The Commission has imposed binding commitments on Gazprom in order
to address its alleged misconduct.35
Although there is no doubt as to the extraterritorial application of TFEU compe-
tition rules, by proposing to amend the Gas Directive 2009/73, the Commission now
conﬁrms that the internal energy legislation would not currently apply effectively to
In our view, it follows that on a literal as well as a more purposive reading the cover-
age of the Gas Directive only extends to transmission pipelines (and interconnectors)
within ‘the territory’ of the EU – that is, at the ﬁrst interconnection point in an EU
accessed 15 December 2018. Also, see generally Alan Riley, ‘Nord Stream 2: A Legal and Policy Analy-
sis’ (CEPS Special Report No 151/2016).
31 K Talus, ‘An Intergovernmental Agreement for Nord Stream 2: Rationale, Content and Impact’ Oil, Gas
and Energy Law 1 (2018); Anna Herranz-Surrales, ‘Energy Diplomacy Under Scrutiny’ (2017) 40 West
European Politics 183.
32 See Commission opinions on the application for exemption for Nabucco (2008 and 2009) and its
. accessed 31 January 2019
33 Further details are available on www.nord-stream2.com
accessed 15 December 2018.
34 See ‘Tusk urges EU states to extend gas rules to Russia’s Nord Stream 2 pipeline’ Financial Times,
November 16, 2017 www.ft.com/content/8445c30e-9963-31e9-8975-159b0aa04f2c.
35 See European Commission, ‘Antitrust: Commission Imposes Binding Obligations on Gazprom to
Enable Free Flow of Gas at Competitive Prices in Central and Eastern European Gas Markets’ (Press
Release, 24 May 2018) http://europa.eu/rapid/press-release_IP-18-3921_en.htm
accessed 15 December
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Journal of Energy & Natural Resources Law
Member State – the border of EU jurisdiction.36
As a result, we subscribe to the gen-
erally agreed view that sub-sea external gas pipelines such as Nord Stream 1 and Nord
Stream 2 bringing gas from Russia to Germany are not covered by the current legis-
lation, nor are similar sub-sea pipelines bringing gas from Algeria, Libya or Norway.
The application of the EU energy ‘acquis’ and the TEP can only commence once the
pipeline has been connected to the EU transmission system.37
The security of supply dimension
Although one of the justiﬁcations advanced for extending the current rules to external
pipelines is to promote security of supply of gas into the EU, it is noteworthy that the
recently adopted Security of Supply (SoS) Regulation 2017/1983, which entered into
force on 1 November 2017,38
does not extend to these pipelines. Regulation 2017/
1938 contains a number of relevant provisions, which may have some impact on the
regulatory treatment of new pipeline capacity in the EU. In particular, the Regulation
provides for common risk assessments, preventative (regional) action plans and an
information exchange mechanism with reference to gas supply contracts. These
measures, which are designed to strengthen regional coordination of emergency plan-
ning in the event of gas shortages, may have some (albeit indirect) inﬂuence on the
development and utilisation of new gas transmission capacity.
This SoS Regulation preserves earlier infrastructure and supply standards and intro-
duces a new ‘solidarity’ measure.39
As of 1 March 2019, a Member State that is directly
connected to another Member State that has requested the application of this solidarity
measure is obliged, under certain conditions, to take measures to ensure the gas supply
to protected customers (other than ‘solidarity protected’ customers in its territory) in the
requesting Member States (Article 13). Member States are obliged to adopt the necess-
ary measures by 1 December 2018 and include them in their emergency plans. The
requesting Member States must agree to pay fair and prompt compensation.
The SoS Regulation puts a premium on regional cooperation between Member
States – and in particular coordination of responses to emergencies for four speciﬁed
regional risk groups (see Article 3.7).40
The competent authorities for the various
risk groups are obliged to agree on a cooperation mechanism to conduct risk assess-
ments, which must in turn include the identiﬁcation and assessment of energy supply
corridors. The Member States are then required to prepare a national risk assessment,
which must be fully consistent with the common risk assessment (Article 7).
36 Council, Opinion of the Legal Service (n 25); Kim Talus, ‘Application of EU Energy and Certain
National Laws of Baltic Sea Countries to the Nord Stream 2 Pipeline Project’ (2017) 10 Journal of
World Energy Law and Business 30, 34–37; Andreas Goldthau, ‘Assessing Nord Stream 2: Regulation,
Geopolitics and Energy Security in the EU, Central and Eastern Europe and the UK’ (King’s College
London Department of War Studies and King’s Russia Institute Strategy Paper No 10, 2016) 21–22;
Kim Talus and Moritz Wüstenberg, ‘Risks of Expanding the Geographical Scope of EU Energy Law’
(2017) 26 European Energy and Environmental Law Review 138, 138–41.
37 For a minority view, see Riley (n 30).
38 Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October 2017 concern-
ing measures to safeguard the security of gas supply and repealing Regulation (EU) No 994/2010 
OJ L280/1 (hereinafter SoS Regulation).
39 SoS Regulation (n 38) Art 13.
40 SoS Regulation (n 38) Art 3.7 and risk groups taken up in Annex I.
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L Hancher and A Marhold
Notably, these risk assessments must take into account ‘risks relating to the control of
infrastructure’ relevant to security of gas supply, including risks of underinvestment,
undermining diversiﬁcation, misuse of existing infrastructure or an infringement of
EU law (Article 7.4e). Furthermore, the assessments must run various scenarios for
exceptionally high gas demand and disruption of gas supply considering the probability
of disruption, inter alie, of supplies from third-country suppliers, as well as where
appropriate, geopolitical risk. The Member States on whose territory a new pipeline
is to be built would be obliged to demonstrate the ways in which such risks could be
Although the SoS Regulation does not empower the EU or a Member State to
prevent the construction or use of the new pipeline, the onus will be on the Member
State in demonstrating how identiﬁed risks are to be mitigated to conﬁrm that the pipe-
line is built and operated in accordance with the applicable ‘acquis’.
The intergovernmental agreement solution?
The Commission appeared to have already conceded that EU energy law is not appli-
cable to external pipelines such as NS2 in May 2017. In order to ﬁll what it claimed to
be a ‘legal void’ as a result of the non-application of the Gas Directive 2009 to such
projects, or to avoid a conﬂict of laws, the Commission ﬁrst initiated a process to
acquire a mandate from the Council to negotiate an intergovernmental agreement
with Russia on NS2 (the IGA) to cover the offshore section of the pipeline, its building
and operation on the basis of Article 218 of the TFEU.41
The IGA would be based on
fundamental principles stemming from EU energy law.
The Opinion of the Council Legal Services
The Council Legal Services, in its Opinion of 27 September 2017 (Opinion 2017) on
the requested mandate,42
concluded that the Gas Directive 2009/73/EC ‘does not set
out a comprehensive framework for gas pipelines to and from third countries’.43
also rejected the Commission’s claims that a legal void existed. An international pipe-
line such as NS2 is regulated by international law, EU law and the national law of the
‘the offshore parts of the [NS2] pipeline would in any event be subject
to the relevant rules of international law, including the law of the sea’ (para 16) and the
third state [Russia] … and the Member State concerned [Germany] and the Union …
would in any event have jurisdiction to regulate the operation [of Nord Stream 2] at
the respective points of departure and arrival of the pipeline on their territory, and
there is no third point of entry or exit along the pipeline. (para 17)45
41 European Commission Press Release, IP/17/1571, ’Commission seeks a mandate from Member States to
negotiate with Russia an agreement on Nord Stream 2’, Brussels, 9 June 2017 http://europa.eu/rapid/
accessed 31 January 2019.
42 Council, Opinion of the Legal Service 12590/17 (n 1).
43 Council, Opinion of the Legal Service 12590/17 (n 1) paras 36–37.
44 See Talus (n 36) 34–37 and Talus (n 31).
45 Council, Opinion of the Legal Service 12590/17 (n 1) paras 16–17.
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Furthermore, the Opinion 2017 reasoned, as the Gas Directive does not apply to off-
shore pipelines, there can be no issue of a ‘conﬂict of laws’ between the Gas Directive’s
regulatory regime for internal pipelines and the rules applied, if any, by a third
The Legal Service’s assessment did not advise the Council against the
decision to approve the mandate; it merely stated that as there was no legal rationale,
any such decision would necessarily have to be political. However, the Council’s
decision granting the mandate and authorising negotiations must be able to stand the
test of judicial review, and the Opinion indicates that this might well be problematic.47
Exploring the Commission Proposal to amend the Gas Directive
The proposed amenments to the Gas Directive
The Commission proposal would amend the deﬁnition of an ‘interconnector’ in Article 2
(17) of the Gas Directive 2009/73 to include transmission lines that cross or span a border
between Member States and third countries ‘up to the border of the Union jurisdiction’.
Its ﬁfth recital states that the applicability of Directive 2009/73 for gas pipelines to and
from third countries remains conﬁned to the territorial limits of the EU’s jurisdiction, but
as regards offshore pipelines, this should apply ‘in the territorial waters and exclusive
economic zone of the Member States’.48
As a result, EU energy law on unbundling, trans-
parency, third-party access and regulated tariffs would not only apply to
gas pipelines to and from third countries which are in the territory of Member States but
also to offshore pipelines situated in their internal waters as well as in their exclusive
economic zone (EEZ), as long as the offshore pipeline has an interconnection point
with the Union network.49
In the opinion of the Council’s Legal Service on the Commission proposal of March
2018 (the so-called UNCLOS Opinion), the Commission’s assertion of regulatory
power was defective. It would de facto imply that pipelines landing onshore in a
Member State would automatically trigger EU jurisdiction. Extending EU law, and
thereby the Gas Directive, to the EEZs of Member States would have signiﬁcant con-
sequences regarding the treatment of offshore pipelines passing through the EEZ of a
Member State as pipelines crossing its territory.50
46 For an overview of the timeline and procedures surrounding the legal aspects of Nord Stream 1 and 2, see
Katja Yaﬁmava, ‘The Council Legal Service’s Assessment of the European Commission’s Negotiating
Mandate and What It Means for Nord Stream 2’ (Oxford Institute for Energy Studies Energy Insight 19,
October 2017); Council, Opinion of the Legal Service 12590/17 (n 1) paras 38–41.
47 See also K Talus, ‘European Commission Crusade Against a Pipeline: Act Three’ Oil, Gas & Energy
Law 4 (2018).
48 International law differentiates between two categories for the application of legal systems at sea. Within
the territorial waters (up to 22 kilometres from the coast), states have an exclusive right to apply their
domestic laws. In the context of EU Member States, EU law also applies similarly. The EEZ (up to
370 kilometres) is not sovereign territory of a state, but an area where states can exercise activities of
exploration and exploitation, according to UNCLOS, see nn 22 to 24. In addition, international environ-
mental standards apply. In the case of Nord Stream 2, the pipeline only crosses the territorial waters of
Russia, Germany and Denmark (around the island of Bornholm), but touches the EEZ of several coastal
49 Council, Opinion of the Legal Service 6738/8 (UNCLOS Opinion) (n 25) para 3.
50 Council, Opinion of the Legal Service 6738/8 (n 25) para 5. Regarding Art 11 of the Gas Directive (n 1)
see para 6.
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L Hancher and A Marhold
At present, the European Parliament, the Commission and Council have not decided
on a common position on the Commission proposal to amend the Gas Directive. Nor
are any of their positions published or ﬁnal: no text has been adopted in Parliament
and there is no agreed position in the Council. Proposed amendments by the European
Parliament on the territorial scope seem to support the original Commission proposal.
Exemptions under Article 36 of the Gas Directive would, however, be limited to ﬁve
years and the European Parliament proposes to extend powers of national regulatory
authorities to decide upon exemptions if third-country authorities do not respond to
consultations. Derogations should be under Commission supervision albeit that the
Commission would issue an opinion and not have the power to veto.
The UNCLOS dimension
While the EU is a party to the United Nations Convention on the Law of the Sea
(UNCLOS), setting out the rights and responsibilities of states with respect to their
use of the world’s oceans, the EU can only act within the competences conferred to
it by the Member States.51
According to the Legal Service of the Council’s analysis,
the sovereignty of a coastal state under Article 2 of UNCLOS extends to the territorial
sea as well to the bed and its subsoil.52
By extension, the application of EU energy law
to this part of Member States’ territory would thus be permissible under UNCLOS.53
However, since the purpose of the EEZs is to strike a balance between the freedom
of the high seas for all states and a limited set of rights for coastal states, as set out
in Part V of UNCLOS,54
the Legal Service of the Council considered that the EU
cannot rely on Article 58(3) of UNCLOS and may not invoke issues of security of
supply to do so.55
In its view, the Gas Directive would not ‘qualify as a measure com-
patible with Part V of UNCLOS in the absence of a direct connection with any of the
subject matters listed in Article 56(1)’.56
Only Member States have the jurisdiction to establish the conditions for pipelines
entering its territory or territorial sea, while the sovereignty of the coastal state over
the EEZ and the continental shelf is merely functional.57
It follows that the EU does
not have jurisdiction to apply energy law on unbundling, tariffs, third-party access
and regulated tariffs in the EEZs of Member States, as it is unrelated to the economic
51 UNCLOS (n 23).
52 Council, Opinion of the Legal Service 6738/8 (UNCLOS Opinion) (n 25) para 11, although the opinion
explains that this right is not absolute but subject to other rules of international law.
54 Council, Opinion of the Legal Service 6738/8 (UNCLOS Opinion) (n 25) para 16 and Part V UNCLOS
(n 23). Article 58 of UNCLOS sets out that coastal states’ freedoms in the EEZs can only be exercised in
compliance with the laws and regulations adopted by the coastal state following the provisions of
UNCLOS or public international law. Since national regulations are permitted ‘in so far as they are
not incompatible’ with Part V of the Convention, the obligation to respect them exists only to the
extent that they are within the scope of the sovereign rights and jurisdictions recognised under Art 56
(1). Also see Talus (n 36) 32–33.
55 UNCLOS (n 23) Art 58 and Council, Opinion of the Legal Service 6738/8 (UNCLOS Opinion) (n 25)
56 UNCLOS (n 23) Art 58 and Art 56(1) on rights, jurisdiction and duties of the coastal state in the exclu-
sive economic zone. See also generally K Talus, ‘European Commission Crusade Against a Pipeline: Act
Three – Lex Nord Stream 2’ (2017) Oil, Gas & Energy Law (n 47).
57 Case C–111/05 Aktiebolaget NN v Skatteverket EU:C:2007:195 .
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Journal of Energy & Natural Resources Law
exploitation of the EEZ.58
The EU can only act within the competences conferred on it
by the Member State.
The future allocation of competences in concluding intergovernmental
As explained, the shared competence on the area of energy ﬂows from Article 4(2)(i) of
Currently, it follows from the analysis in section 2.2 above that Member
States have jurisdiction to regulate the operation of third-country interconnectors to
which Gas Directive 2009/73/EC is not applicable at present. They retain the compe-
tence to conclude international agreements to regulate the operation of such pipelines
following Article 2(2) of the TFEU.60
Since the Commission proposal can only apply to the part of a pipeline that lies within
the EU’s jurisdiction and not to the part of the pipeline under the jurisdiction of a third
country, an IGAwould become necessary to determine the legal framework for the operation
of such a pipeline whenever the third-country legislation differs from EU energy law on
unbundling, third-party access, regulated network tariffs and transparency requirements.
An exclusive competence to act on future external matters?
Even if the Commission proposal to amend the Gas Directive may seem like a techni-
cality, it may have an impact on how competences are shared between the EU and the
If the Commission proposal is adopted, future IGAs would fall within an area that is
largely covered by EU common rules and would be liable to affect those common rules
or alter their scope within the meaning of Article 3(2) of the TFEU.61
It follows that the
conclusion of a future IGA would fall under the exclusive external competence of the
EU insofar as it is liable to affect the common rules of the Gas Directive or alter their
scope within the meaning of Article 3(2) of the TFEU. Notably, the European Court of
Justice has conﬁrmed the existence of exclusive external EU competence in cases
where an international agreement concerns an area that is internally covered by a direc-
tive that allows Member States to derogate from common requirements.62
After the adoption of the proposed amendments to the Gas Directive, Member
States would be under the obligation to take all appropriate steps to eliminate the
58 Council, Opinion of the Legal Service 6738/8 (UNCLOS Opinion) (n 25) paras 19 and 21. NB the analy-
sis of the Council is relevant not only for offshore gas pipeline projects, but also for offshore grids such
as the planned North Sea Wind Power Hub, a remote wind farm under the proposed Clean Energy
Package; see European Commission, ‘First Meeting of the North Seas Energy Forum Held’ https://ec.
accessed 15 December 2018,
and whose work programme is stated to be undertaken in line with existing obligations under inter-
national law, see Annex 1 to the Political Declaration on Energy Cooperation between the North Sea
59 TFEU (n 16) Art 4(2).
60 NB: there was no formal IGA between Germany/EU and Russia for Nord Stream 1, perhaps owing to the
different political landscape; see Lang and Westphal (n 3) 13.
61 TFEU (n 16) Art 3(2) states that ‘[t]he 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.’
62 See Judgment of 26 November 2014, Case C–66/13 Green Network SpA v Autorità per l’energia elet-
trica e il gas EU:C:2014:2399, para 54. Opinion 3/15, Marrakesh Treaty ECLI:EU:C:2017:114.
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L Hancher and A Marhold
incompatibilities of the existing intergovernmental agreements with the Gas Directive
in accordance with Article 4(3) second subparagraph of the TEU and Article 351(2) of
the TFEU. Member States would be under the obligation to terminate existing IGAs
whenever possible, and the competence to renegotiate them would lie with the EU pur-
suant to Article 3(2) of the TFEU.
The existing balance of competences could be altered by the the Commission pro-
posal to amend the Gas Directive in a variety of ways. First, Member States could no
longer take unilateral decisions on exemptions. The Commission proposal claims that
to ensure that the provisions of the Gas Directive are ‘applied consistently up to the
border of Union jurisdiction’, exemptions for new infrastructures under Article 36
would have to be agreed by all the national regulatory authorities concerned and,
where they are not able to reach an agreement, under certain conditions, by the
Agency for the Cooperation of Energy Regulators (ACER). Article 36(4) states that
[w]here the infrastructure in question is also under the jurisdiction of one or more third
countries, the national regulatory authorities of the Member States shall consult the rel-
evant authorities of the third countries prior to adopting a decision with a view to ensur-
ing, as regards the concerned infrastructure, that the provisions of this Directive are
applied consistently up to the border of Union jurisdiction.
The Council Legal Service has opined63
that a decision by all the national regulators of
the Member States whose EEZ is in the EU’s jurisdiction would be required.
Second, Article 36(9) would extend the Commission’s veto power on exemptions to
(new) interconnectors to and from third countries. Member States could no longer
decide how to regulate their ‘import pipelines’ with third countries. Finally, the Com-
mission proposal may also have an impact on the powers of Member States to negotiate
new (and maintain existing) bilateral agreements (IGAs) with third countries.
In this context, legal questions arise as to whether a Member State could:
(1) invoke Article 194(2) to contest (and veto) the Commission proposal as such;
(2) claim that Article 194(2) allows it to opt out of adopting the Commission pro-
posal in its jurisdiction; or
(3) insist that in view of Article 194(2) the draft must be adopted on the basis of
More importantly, a completely novel issue could arise: could a Member State rely on
Article 194(2) of the TFEU to refuse to renegotiate an IGA, or even to negotiate a new one?
Conclusion: a common EU framework regulating import pipelines: does an
amended Gas Directive provide the answer?
As it has proved difﬁcult so far for the Commission to obtain a negotiating mandate
with the Russian Federation on Nord Stream 2, it has opted to amend the Gas Directive
63 Opinion of the Legal Service, 7502/18 (JUR 152, ENER 109, CODEC 442, Council of the EU, 26 March
2018) (Opinion 26 March 2018).
64 NB: it should be mentioned that the Legal Service of the Council does not see TFEU, Art 194(2) as an
obstacle in the Commission proposal as such.
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Journal of Energy & Natural Resources Law
to secure a common legal framework regulating import pipelines. Apart from viewing
the lack of a common framework as detrimental to the security of supply, the Commis-
sion has attempted to create certainty on the application of the rules on unbundling,
transparency and third-party access to various categories of pipeline. The question
remains whether the Commission to amend the Gas Directive is the panacea for the
uniform regulation of import pipelines that the Commission envisioned.
First of all, it is certain that an amended Directive, for reasons explained in this con-
tribution, would not result in the application of a uniform set of rules over the entire
route of the pipeline, and it would be misleading to assume that a single pipeline infra-
structure originating in a third country and terminating in an EU Member State would
be subject to a uniform regulatory framework.
Moreover, the Commission proposal would be applicable not only to planned and
future pipelines, but also to existing pipelines between EU Member States and third
countries to the extent that these pipelines fall within the new deﬁnition of an intercon-
nector as provided by the amended Article 2(17) – albeit that derogations and exemp-
tions would be possible in the interests of legal certainty. This is accompanied by
difﬁculties regarding the division of competences and it may entail the withdrawal of
existing intergovernmental agreements with third countries. Existing gas pipelines
that could be affected by the Commission proposal enter the EU from Algeria,
Libya, Morocco, Norway, Russia and Tunisia. It remains to be seen whether a
Member State could invoke Article 194(2) to refuse to renegotiate an IGA or to cede
competence to the EU to negotiate a new agreement. The Commission proposal may
also have an impact – post-Brexit – on pipelines connecting the United Kingdom
with EU Member States.
What is more, the current Commission proposal seems to be creating two different
kinds of regimes, one that would regulate pipelines geographically, and the other one
regulating different types of infrastructure under the regulations (eg, the regime
would be applicable to pipelines, but why not to LNG facilities?). The Commission pro-
posal may open a Pandora’s box in terms and may raise serious issues of discrimination
under the rules of the World Trade Organization – issues that inevitably have to be kept
in mind by the Commission.65
The authors wish to thank the reviewers at the Journal of Energy & Natural Resources Law for
their useful comments. Errors are ours alone.
65 See WTO, European Union and its Member States – Certain Measures Relating to the Energy Sector –
Report of the Panel (Russian Federation – European Union) WT/DS476/R.