Shannon LNG Ltd and Another v Commission for Energy Regulation and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Cooke
• Judgment Date: 11 December 2013
• Neutral Citation: [2013] IEHC 568
• Court: High Court
• Date: 11 December 2013

[2013] IEHC 568

THE HIGH COURT

[No. 760 J.R./2012]

Shannon LNG Ltd & Shannon LNG Energy Ltd v Cmsn for Energy Regulation & Ors

MR JUSTICE COOKE

APPROVED TEXT

JUDICIAL REVIEW

BETWEEN

SHANNON LNG LIMITED AND SHANNON LNG ENERGY LIMITED

APPLICANTS

AND

COMMISSION FOR ENERGY REGULATION

FIRST NAMED RESPONDENT

AND

IRELAND,

SECOND NAMED RESPONDENT

AND

THE ATTORNEY GENERAL

THIRD NAMED RESPONDENT

AND

BORD GAIS ÉIREANN

NOTICE PARTY

ELECTRICITY REGULATION ACT 1999 S8

GAS (INTERIM) (REGULATION) ACT 2002 S5

ELECTRICITY REGULATION ACT 1999 S9

EEC DIR 73/2009

EEC DIR 55/2003

EEC REG 715/2009

EEC REG 1775/2005

EEC REG 713/2009

TREATY ESTABLISHING THE EUROPEAN COMMUNITY ART 95

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 114

TREATY ESTABLISHING THE EUROPEAN COMMUNITY ART 47

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 53

EEC DIR 73/2009 RECITALS 56-58

EEC REG 715/2009 RECITAL 7

EEC DIR 73/2009 ART 13

EEC DIR 73/2009 ART 32(1)

EEC DIR 73/2009 ART 35

EEC DIR 73/2009 ART 41(1)(A)

EEC DIR 73/2009 ART 41(4)(B)

EEC DIR 73/2009 ART 41(6)

EEC DIR 73/2009 ART 46(10)

EEC DIR 73/2009 ART 33(3)

EEC REG 715/2009 ART 2(2)

EEC REG 715/2009 ART 13

EEC REG 715/2009 ART 27(1)

GAS ACT 1976 S10(A)

EUROPEAN COMMUNITIES (INTERNAL MARKET IN NATURAL GAS & ELECTRICITY) REGS 2011 SI 630/2011

GAS ACT 1976 S10(A)(1)

GAS ACT 1976 S10(A)(2)

GAS ACT 1976 S10(A)(5)

GAS ACT 1976 S10(A)(3)

GAS ACT 1976 S10(A)(4)

GAS ACT 1976 S10(A)(8)

GAS ACT 1976 S10(A)(17)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 108.3

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 108

POSTAL & TELECOMMUNICATIONS SERVICES ACT 1983 S111(2)

EUROPEAN COMMUNITIES (MOBILE & PERSONAL COMMUNICATIONS) REGS 1996 REG 4

COMPETITION ACT 2002 S24

ELECTRICITY REGULATION ACT 1999 S32

GAS (AMDT) ACT 2000 S15

RSC O.84

EEC DIR 73/2009 ART 41

EEC DIR 73/2009 ART 41 PARA 15-17

EUROPEAN COMMUNITIES (ELECTRONIC COMMUNICATIONS NETWORKS & SERVICES) (FRAMEWORK) REGS 2011 SI 333/2011

EEC DIR 21/2002 REG 4

VODAFONE IRL LTD v CMSN FOR COMMUNICATIONS REGULATION UNREP COOKE 14.8.2013 2013 IEHC 382

POSTAL & TELECOMMUNICATIONS SERVICES ACT 1983 S111

ORANGE v DIRECTOR OF TELECOMS (NO 2) 2000 4 IR 159 2000/15/5538

CANADA (DIRECTOR OF INVESTIGATION & RESEARCH) v SOUTHAM INC 1997 1 SCR 748 144 DLR (4TH) 1 71 CPR (3D) 417 50 ADMIN LR (2D) 199

GAS INTERIM REGULATION ACT 2004 S14

GAS ACT 1976 S17(B)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART107

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 4(3)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 102

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 41(3)

EEC DIR 73/2009 ART 2

EEC REG 994/2010

EEC DIR 73/2009 ART 2(17)

GAS ACT 1976 S10(A)(17)(E)

EEC DIR 73/2009 ART 2(4)

EEC DIR 73/2009 RECITAL 32

EEC DIR 73/2009 ART 13(2)

EEC DIR 73/2009 ART 13(4)

EEC REG 715/2009 ART 13(1)

EEC REG 715/2009 RECITAL 19

EEC DIR 73/2009 ART 13(1)(B)

EEC DIR 73/2009 ART 31(3)

EEC DIR 73/2009 ART 41(1)(F)

EEC DIR 73/2009 ART 41(13)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 107-108

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART107(1)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 108(3)

EEC DIR 73/2009 ART 35(1)

DEUTSCHE TELEKOM v CMSN 2010 ECR I-9555 2010 5 CMLR 1485

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 108(3) PARA 4

COMPETITION LAW

Energy

Telescoped application for leave and for an order of certiorari - Legality of gas tariff regime - Methodology proposed for calculation of tariffs relating to use of and access to State transmission system - Assertions of illegality - Treatment of undersea inter-connectors to transmission network in United Kingdom - Decision that reform of current regulatory regime necessary impugned - Decision to abolish distinction between onshore assets and interconnectors - Two new sources of supply anticipated - Mandatory cross-subsidisation - Regarded interconnectors as part of transmission system - Actual costs incurred - Entry/exit tariffs - Incompatibility with legislation - European Union legislative regime - Aim of establishment of internal market in natural gas - Access to system - Single entry tariff charge - Required to pay for infrastructure not used - Abuse of dominant position - Scope and standard of review - Statutory interpretation - Proportionality - Infringement of competition rules - Whether acted unlawfully -Whether acted ultra vires - Whether abolition of infrastructure distinction between onshore assets and interconnectors incompatible with legislation - Whether definition of âÇÿinterconnector' constituted basis for separate treatment for tariff setting purposes - Whether infringement of European Union law - Whether abuse of dominant position - Whether application premature - Whether any obligation on State to notify new regime as alleged State aid - Whether tariffs discriminatory - Vodafone Ireland Ltd v Commission for Communications Regulation [2013] IEHC 382, (Unrep, Cooke J, 14/8/2013); Orange Ltd v Director of Telecoms (No2) [2000] 4 IR 159; Canada (Director of Investigation and Research) v Southam Inc [1997] 1 SCR 748 and Deutsche Telekom v Commission (Case C-280/08P) [2010] I-ECR 3555 considered - European Communities (Internal Market in Natural Gas) Regulations 2005 (SI 320/2005) - European Communities (Internal Market in Natural Gas and Electricity) Regulations 2011 (SI 630/2011) - European Communities (Mobile and Personal Communications Regulations 1996 (SI 123/1996), reg 4 - Rules of the Superior Courts 1986 (SI 15/1986), O 84 - European Communities (Electronic Communications Networks and Services) (Framework) Regulations 2011 (SI 333/2011), reg 4 - Electricity Regulation Act 1999 (No 23), ss 8, 9 and 32 - Gas (Interim) (Regulation) Act 2002 (No 10), s 5 - Gas Act 1976 (No 30), s 10(a) - Postal and Telecommunications Services Act 1983 (No 24), s 111(2) - Competition Act 2002 (No 14), s 24 - Gas (Amendment) Act 2000 (No 26), s 15 - Directive 2009/73/EC, arts 2, 13, 32(1), 35, 41 and 46(10) - Directive 2003/55/EC - Directive 2002/21/EC, reg 4 - Regulation (EC) 715/2009, arts 2(2), 13 and 27(1) - Regulation (EC) 1775/2005 - Regulation (EC) 713/2009 - Treaty on the Functioning of the European Union, arts 53, 102, 107, 108 and 114 - Application refused (2012/760JR - Cooke J - 11/12/2013) [2013] IEHC 568

Shannon LNG Limited v Commission for Energy for Regulation

Facts: These proceedings concerned a telescoped application for leave to apply for and for judicial review of a decision of the first named respondent made on the 29 ^th June 2012. It was argued that that decision should be subject to an order of certiorari because it unlawfully sought to set new methodologies in regards to the calculation of tariffs for the use of and access to the transmission system and pipeline network that supplied natural gas in Ireland, and which was owned and operated by the Notice Party including two undersea inter-connectors to the transmission network in the United Kingdom. The applicant was a company that was set up to develop a terminal near Tarbert, Co. Limerick, for the purposes of importing cargos of liquefied natural gas to the transmission system.

The applicant argued that the first named respondent”s decision unlawfully failed to give distinct treatment for tariff purposes of the interconnectors by regarding them as an integral part of the notice party”s transmission system. It was also said that the decision was unlawful in that it proposed to begin charging a tariff for access to the transmission system based upon a two part tariff comprised of a ‘Long Run Marginal Cost’ (LRMC) element and a ‘revenue shortfall’ element and not upon actual costs incurred by the notice party. Finally, it was said that the decision granted an unnotified state aid to the notice party contrary to Article 108 of the TFEU, which would allow the notice party to require the applicants to cross-subsidise its operating costs of a part of the infra-structure they do not use i.e. the interconnectors. For all these reasons, it was argued that the first named respondent”s decision amounted to an infringement of the competition rules.

Held by Cooke J that there was no doubt that there were no competition rules in the TFEU that were specific to the energy sector, which was why there had been a series of statutory instruments (known as the Third Energy Package) enacted for the gradual liberalisation of the gas and electricity sectors. It was said that these instruments culminated in the ‘Third Gas Directive’ namely, Directive 2009/73/EC of the European Parliament and the Council of 13th July 2009 and Regulation (EC) No 715/2009 of the European Parliament and the Council of 13th July 2009 on conditions for access to the natural gas transmission networks. It was said that the decision reached by the first named respondent was supported by this series of legislation. It was also said that whilst the primary competition rules of the TFEU were dominant over this series of legislation, the reality was that a litigant who sought to assert that a commercial practice authorised or directed under the legislation infringed the competition rules of the TFEU faced a difficult onus of proof. In this case, the applicant was arguing that the first named respondent”s decision was contrary to Article 102 TFEU despite the decision being supported by the framework of a regulatory regime.

It was pointed out that no actual tariffs had yet been set and that no entry or exit charges had been calculated by the notice party. For that reason, it was held that it was not yet possible to determine whether the first named respondent”s decision discriminated against the applicant. It was also said that even though that determination could not be made, the Court was not satisfied that the first named respondent”s decision in...