Case C-264/09, Commission v. Slovakia, Judgment of the Court (First Chamber) of 15 September 2011

Commission v. Slovakia concerned the cornerstone of the internal energy market – non-discriminatory third party access to the network. It also involved the delicate interaction between EU law and international investment law. In particular, this case relates to the possibility of justifying non-compliance with third party access because of alleged international protection of a foreign investor’s priority access right to the network. The Court ruled that because Slovakia committed itself towards the investor prior to its EU accession, priority access was protected under the pacta sunt servanda principle of Article 351(1) TFEU, even if this right violated the fundamental EU law obligation of non-discriminatory access to the network. Reconciling the duties of “new” Member States under EU law with the international investment obligations to which they adhered prior to acceding to the EU has been the subject of an intense debate in the EU law and investment law literature. The tension between the rights of foreign investors and EU law is particularly acute in the energy sector. Given the strategic importance of energy supply, regulatory initiatives can target foreign investors, as illustrated by the recent introduction of a “Gazprom-clause” to limit the control of non-EU companies on critical infrastructure. Non-EU investors (e.g. Gazprom) have a large presence in the energy sector of the Member States that joined the EU in the last ten years. The rights of foreign investors under the BITs, in connection with consideration of the BITs under Article 351 TFEU, will determine the margin for manoeuvre that “new” Member States will have in implementing these regulatory initiatives.