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

A parallel post from sister blog AfricanAntitrust.com:

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.

How does this relate to competition?  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.”

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)?

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 for its “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? The key take-away here may be this:

Very simply put: any 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.

Class Actions in South Africa? Attend the 12 June 2013 seminar @ Wits Law School

Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment, handed down by Judge Wallis of the Supreme Court of Appeal last year, and the effects it has on South Africa’s jurisprudence.

The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).

For more information, a full schedule, and to sign up, please visit the event page here.

Background:

On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).

The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:

  • there must be an objectively identifiable class;
  • a cause of action must exist which raises a triable issue;
  • there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
  • there must be appropriate procedures for distributing damages to the members of the class; and
  • the representatives must be suitable to conduct the litigation on behalf of the class.

The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements.  Accordingly, the SCA remitted the matter back to the WCHC.