BRICS, energy, EU

How a BRICS country defeats EU Commission & the rule of law

South Stream pipeline

South Stream pipeline

According to various reports, the European Commission (specifically, its top management in the energy DG [Oettinger] and its president [Barroso], as well as others) has caved to the Russian energy powerhouse GAZPROM.

N.B.: (1) Yes, this relates to Africa.  (2) And yes, this relates to competition.

It relates to competition because the pending antitrust investigation by Mr. Almunia, already hamstrung, is clearly hampered by this development from its adjacent energy DG.  One Commissioner has caved, and another (a lame duck by now, who has already announced his retirement from the entire realm of politics) will not even bring a conclusion to his DG’s investigation into GAZPROM.  Putin and his friends at the gas giant have (now successfully) challenged the European energy and competition ministers, effectively saying to them: “We will break your laws, and there isn’t a thing you can do about it.”

It relates to Africa, because this is the story of how a BRICS country state-owned enterprise (or at least de facto SOE) is fully capable of defeating the “rule of law” that European proponents of the superiority of Western legal systems often tout.  Is EU law hard and fast?  Unbreakable?  Strictly enforced?  Without exceptions, for special friends (or powerful foes)?  All the common criticisms that are levied by eurocrats against developing African judicial systems are brought to the fore by this abject failure of the EU to uphold its own laws vis-a-vis a stronger opponent.

Banana Republic Brussels

The answer to the rhetorical questions posed above is – quite clearly as of today at least – a resounding “no“:

The EU has caved.  EU laws can be broken.  Without any consequences.

Until recently, the GAZPROM contracts with EU member states for its (63 billion cubic metres of gas per year) “South Stream” Project violated EU law, according to prior statements of the relevant EU Commissioners and their spokespeople.  The main concerns (here from the energy perspective, not the competition issues) were:

  • ownership unbundling rules violated by Gazprom being both a producer and a supplier of gas that owns simultaneously production capacity and its own transmission network
  • 3d-party non-discriminatory access endangered by Gazprom being exclusive shipper
  • South Stream’s pricing structure violates EU energy tariff rules

Yet, after some diplomatic prodding and economic threats, the Commission now has changed its tune and is literally giving GAZPROM a “get-out-of-jail-free card.”

“Gunther Oettinger, the European Commissioner for Energy, told Vedomosti newspaper that Moscow and Brussels will find a solution to honor previous intergovernmental agreements Gazprom has made with European transit countries.” (Source: Vedomosti newspaper, as quoted by rt.com)

Contrast this with what Mr. Oettinger said back in 2011 (note that he also (1) called South Stream a “phantom project” and essentially didn’t believe the Russians would go ahead with its construction in 2012, and (2) was quite clear in his understanding of how market participants operate: “money talks,” baby!):

I understand that certain EU Member States entered into bilateral agreements with the Russian Federation which may partially contradict these principles. If this is true, these Member States will nevertheless have to apply the internal market rules and they are under an obligation to bring their IGAs in line with the EU legislation. (Source: His own speech)

Even more tellingly, contrast the green light now given to the project with Mr. Oettinger’s spokespersons’ statements from December 2013 and even August 2013:

“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law,” Borchardt said.

“That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added.  (Source: EurActiv)

Lesson (not) learned

How to wrap up a piece that essentially sounds the death knell of the rule of law in the EU, especially in Brussels?  Well, since this is an AfricanAntitrust.com post (this could arguably be published anywhere), the focus should be on EU lessons learned on the African continent.  The key take-away here may be this:

Very simply put: any African (or other BRICS or BRICS-like country) negotiator dealing with an official EU delegate as his or her counterparty should keep the “GAZPROM incident” in mind when faced with a lecture on the superiority and objectivity of EU law over whichever domestic judicial system may be at issue.

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BRICS, class actions, collusion, Uncategorized

Dutch suit against “paraffin mafia” cartel moves forward

south_africa

A Dutch district court has set what some believe may be a new landmark precedent in the area of private cartel enforcement in the European Union, including against South African company Sasol.

The case is what appears to be a fairly straight-forward “follow-on” civil action, i.e., a complaint brought in civil court by injured parties (or those who acquired those parties’ rights to sue) that is based entirely on a European Union Commission decision condemning illegal cartel activity within the common EU market.

My neighbors on the Avenue Louise here in Brussels, CDC (Cartel Damages Claims), had bought the rights to sue from various purchasers of paraffin wax and lodged the complaint against the “paraffin mafia” (Shell’s words, quoted by Neelie Kroes – also see here) in September 2011. The 13-year cartel (1992-2005)** may well result in sizeable civil damage awards (Sasol’s reduced EC fine alone was 318 million €) once the procedural and jurisdictional hurdles have been cleared. And this most recent ruling goes a long way in doing so. The key “procedural issues” that had to be resolved first were whether all of the cartel members could be sued in the Netherlands, even though not all of them operated in that country, and whether the pending EU court appeals against the 2008 Commission decision effectively stayed the parallel civil proceedings in the Dutch court.

The court ruled in favour of the plaintiff group on both accounts, holding that all cartelists could be sued together for damages in the jurisdiction in which any one of their fellow co-conspirators has its seat [here, that would notably be Royal Dutch Shell, ironically the cartel’s whistle-blower that escaped the EC ruling with a zero-€ fine] . That is, even though purported ring-leader Sasol or any of the other [non-Dutch] alleged cartelists may not have had any operations in the Netherlands, they can still be subject to a full-blown civil lawsuit there. In effect, the ruling says that the European Union’s antitrust decisions, combined with the civil protections afforded EU companies and citizens, creates a de facto long-arm statute, reaching beyond the traditional geographic jurisdictional boundaries.

In addition, it held that a pending appeal against an EC cartel decision should not result in an automatic stay of any civil proceedings, as this would unduly curtail the fundamental right to seek compensation of injured parties under EU law.

While I don’t read Dutch — and therefore cannot analyse the actual decision of the NL royal court — I trust that CDC summarised its findings accurately, even though the company clearly has a stake in this and thus a likely bias.

** According to Neelie Kroes’s speech, the cartelists initially met at the “Blue Salon” at a Hamburg hotel bar (my home town, coincidentally). I have a feeling it was this place — it’s always fun to visualise cartel activity in the flesh, just like “The Informant” did for moviegoers in 2009…:

Blauer Saal Kempinski Hamburg

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