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ECJ hearing on Latvia more important than Poland and Estonia

On 29 September, the European Court of Justice (ECJ) held its first hearings on the appeals brought by the European Commission against the 2009 ruling made by the European Court of First Instance (ECFI) in favour of Poland and Estonia in their disputes over their Phase-2 NAPs. An Advocate General (AG) of the ECJ today gave her opinion on these appeals. According to ECJ process, these AG opinions are a first step towards a final ECJ ruling, and the AG’s opinions have tended to be a very good guide to the final verdict in the past.

With the Czech Republic, Hungary and Romania still having appeals against the Commission pending with the ECFI, a final ECJ final ruling in line with the AG’s opinion could have practical and legal implications. In practical terms, the question is what the potential impact on these three countries’ Phase-2 caps of such a ruling would be, and in this respect we think that the Polish and Estonian cases are only of limited importance. This is because Poland kept its cap unchanged and Estonia is still re-negotiating but may also end up with a final number close to the cap originally allowed by the Commission. So, if the three countries with ECFI cases pending were to win on the same grounds as Poland and Estonia, it would not necessarily imply any change to their caps.

By contrast, if the countries with pending ECFI cases were to win their cases on the same grounds as Latvia (and here only the Czech Rep and Hungary made the same technical argument as Latvia about the Commission having passed the deadline for ruling), then the impact on their Phase-2 caps could be material. This is because the ECFI ruling on Latvia’s case -- unlike those on Poland’s and Estonia’s cases -- entitled it to revert to the Phase-2 cap it originally proposed in its NAP.

In due course, the ECJ will also hear the Commission’s appeal against the ECFI’s Latvia ruling, and we think it is only in the case of an ECJ verdict upholding the ECFI’s Latvia ruling that there could be a read-across for the Czech Republic and Hungary. As already explained in our report The ECJ Comes into Play, the upside risk we would see to the aggregate Phase-2 cap if (i) the Czech Rep and Hungary win their ECFI cases on the same technical point as Latvia, and (ii) the ECJ upholds Latvia’s victory at the ECFI, would be 110Mt, or 22Mt per year over 2008-12.

Source: Deutsche Bank