Greece: Radical Retroactive Cuts to RES by the so called “New Deal” draft law presented by the Greek Government

On the 8th of March, the competent Ministry for Environment and Climate Change issued for consultation the draft law on the reform of the Feed-in Tariff system for the compensation of producers of energy from renewable energy sources, the long awaited so called “New Deal”. The alleged aim of the intervention is to reduce the Market Operator’s deficit caused by the inefficient design of the market‘s model so far as well as serious market distortions. The very short public consultation lasted till the 14th of March. Among others, the draft law is about to impose two main measures: On the one hand it provides for a severe retroactive cut on the amount due to the producers, in the form of a lump sum discount offered to the Market Operator for electricity already produced and sold in 2013 and secondly, the new framework introduces unilateral retroactive amendments on the terms of the existing contracts concerning the purchase price for energy produced hereafter. Metaxas & Associates Law Firm, a leading Greek Law Firm with specialization in energy related disputes and regulation has been already requested by a large number of RES Investors, both domestic and foreign, to provide them with legal advice and assist them in forming a targeted strategy to address the numerous legal concerns and reservations as regards the compatibility of this new legislative framework with the Greek Constitution as well as basic principles of European Law both at domestic as well as EU level. It is indeed accurate that the proposed legislative measures constitute a retroactive, radical interference with existing contractual relations that raises serious legal questions concerning the compatibility of the proposed provisions of the draft law with core provisions of the Greek Constitution and general principles of law arising thereof, which are also safeguarded by EU Law according to standard case law of the Court of European Union. It is also important and interesting to see how the EU Commission will react if this kind of measures will actually be adopted by Greece. It will be indeed difficult for the EU Commission not to object to these measures especially in the light of the clear position it has recently formulated in a Communication (COM(2013) 7243) titled “Delivering the internal electricity market and making the most of public intervention”, where it states that “ In order to achieve their objectives, public interventions need to represent stable, long-term, transparent, predictable, and credible commitments to investors and consumers”. Furthermore, it states that “a need to make changes in regulatory conditions in response to developments in the market does not justify applying such changes retroactively to investments already made in situations where the need arises because of failures on the part of the public authorities to correctly predict or adapt to such developments in a timely manner. Applying retroactive changes in such situations will seriously undermine investor confidence and should, to the extent possible, be avoided.”

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On the 8th of March, the competent Ministry for Environment and Climate Change issued for consultation the draft law on the reform of the Feed-in Tariff system for the compensation of producers of energy from renewable energy sources, the long awaited so called “New Deal”. The alleged aim of the intervention is to reduce the Market Operator’s deficit caused by the inefficient design of the market‘s model so far as well as serious market distortions. The very short public consultation lasted till the 14th of March. Among others, the draft law is about to impose two main measures: On the one hand it provides for a severe retroactive cut on the amount due to the producers, in the form of a lump sum discount offered to the Market Operator for electricity already produced and sold in 2013 and secondly, the new framework introduces unilateral retroactive amendments on the terms of the existing contracts concerning the purchase price for energy produced hereafter. Metaxas & Associates Law Firm, a leading Greek Law Firm with specialization in energy related disputes and regulation has been already requested by a large number of RES Investors, both domestic and foreign, to provide them with legal advice and assist them in forming a targeted strategy to address the numerous legal concerns and reservations as regards the compatibility of this new legislative framework with the Greek Constitution as well as basic principles of European Law both at domestic as well as EU level. It is indeed accurate that the proposed legislative measures constitute a retroactive, radical interference with existing contractual relations that raises serious legal questions concerning the compatibility of the proposed provisions of the draft law with core provisions of the Greek Constitution and general principles of law arising thereof, which are also safeguarded by EU Law according to standard case law of the Court of European Union. It is also important and interesting to see how the EU Commission will react if this kind of measures will actually be adopted by Greece. It will be indeed difficult for the EU Commission not to object to these measures especially in the light of the clear position it has recently formulated in a Communication (COM(2013) 7243) titled “Delivering the internal electricity market and making the most of public intervention”, where it states that “ In order to achieve their objectives, public interventions need to represent stable, long-term, transparent, predictable, and credible commitments to investors and consumers”. Furthermore, it states that “a need to make changes in regulatory conditions in response to developments in the market does not justify applying such changes retroactively to investments already made in situations where the need arises because of failures on the part of the public authorities to correctly predict or adapt to such developments in a timely manner. Applying retroactive changes in such situations will seriously undermine investor confidence and should, to the extent possible, be avoided.”