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German court says Nord Stream 2 won’t be exempted from EU rules

The Higher Regional Court in Düsseldorf rejected Nord Stream 2 AG’s application for derogation from the Third Energy Package. EU rules require the owners of pipelines to be different from the suppliers of the gas that flows in them to ensure fair competition.

The ruling will not affect the completion of the controversial pipeline, in which a Gazprom-backed consortium will carry gas from Russia to Germany under the Baltic Sea. The 9.5 billion euros project with a transport capacity of 55 billion cubic metres has faced political opposition from Washington as well as from Ukraine and Poland, which stand to lose out on lucrative transit fees if the pipeline goes into operation.

The derogation procedure was initiated at the request of Nord Stream 2 AG in January 2020, arguing that the rules were discriminatory as they were amended in 2019 at a time when its construction was on hold.

In May 2020, the German regulatory authority rejected the application submitted by Nord Stream 2 AG. The Swiss company appealed against this decision to the Higher Regional Court in Düsseldorf, which in its judgment upheld the decision of the Federal Network Agency (BNetzA). Now, Russia’s Gazprom will be forced to auction pipeline capacity, which could delay deliveries further.

Poland’s oil and gas company PGNiG welcomed the decision of the German court stating that Nord Stream 2, as a gas pipeline not completed before the date of the entry into force of amendment of the Gas Directive does not meet the basic condition entitling to apply for a derogation.

“In the judgment, the Higher Regional Court in Düsseldorf shared the arguments of our companies raised consistently in the course of proceedings before the German regulator and the Court. Thus, it was unequivocally confirmed that Nord Stream 2 must operate in accordance with the rules resulting from the Third Energy Package,” emphasised Paweł Majewski, President of the Management Board of PGNiG SA.

On June 11th, 2021, Nord Stream 2 AG submitted an application to the German regulatory authority for certification under the preferential ITO model. As in the case of the derogation procedure, PGNiG and its German subsidiary PGNiG Supply & Trading submitted an application for admission to the procedure, presenting preliminary arguments that there are no legal grounds for granting certification under the requested model.

In July, Poland won the case concerning the OPAL pipeline, an onshore extension of Nord Stream 1, before the Court of Justice of the European Union. In its verdict, the Court indicated that the European Commission violated the principle of energy solidarity by issuing a decision on revision of the exemption from principles of EU law.

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