On 13 June 2019, the Constitutional Court of Ukraine by its decision (the "Decision") ruled that certain provisions of the Law of Ukraine On National Commission that Performs State Regulation in the Spheres of Energy and Utilities No. 1540-VIII dated 22 September 2016 (the “Law”) are unconstitutional.
The Decision mainly affects provisions of the Law regarding the status of the National Commission that Performs State Regulation in the Spheres of Energy and Utilities (the "Regulator") and regarding appointment of its officials. The Decision will enter into force on 31 December 2019.
Please follow this link to our earlier Law-Now to read more information about the Regulator.
Details of the decision
In its Decision, the Constitutional Court of Ukraine has declared as unconstitutional provisions of the Law on:
- the status of the Regulator as a permanently established independent state collective body which aim is state regulation, monitoring and control over activities of the business entities in the sphere of energy and utilities;
- the self-sufficiency and independence of the Regulator and its officials;
- the prohibition of interference with state activities of the Regulator for bodies of state authority, local self-governance, business entities, political parties, civil groups and professional unions;
- the composition of the Regulator and appointment of its officials by the President of Ukraine and the Parliament of Ukraine; and
- appointment and dismissal of the officials of the Regulator by the decree of the President of Ukraine.
The Decision was based on the following considerations:
- establishment of the Regulator as the central body of the executive power regulating spheres of Energy and Utilities that is not subordinated to the Cabinet of Ministers of Ukraine contradicts the Ukrainian Constitution; and
- the Law in contradiction to Ukrainian Constitution provided additional powers to the President and the Parliament of Ukraine (namely appointment and dismissal of the officials of the Regulator).
Considering the impact of the Decision on the powers and functioning of the Regulator, the Constitutional Court of Ukraine has decided to postpone entering into force of the Decision until 31 December 2019.
Possible means for rectification
In order to preserve functioning of the Regulator and comply with the EU's third package of energy-market legislation establishing requirement of the independent national regulator, the Parliament of Ukraine will be required to amend Ukrainian Constitution and, in particular, foresee establishment of the Regulator as an independent body of the executive branch and give powers to the President and the Parliament of Ukraine to appoint and dismiss officials of the Regulator, before 31 December 2019.
Amendments to the Ukrainian Constitution requires at least three rounds of voting in the Parliament of Ukraine (the last of which requires for adoption of the respective amendments by at least 2/3 of the votes of the members of the Parliament) and positive conclusion of the Constitutional Court of Ukraine. In light of approaching parliamentary elections on 21 July 2019, one can be assume that in the best case scenario such amendments will be adopted in the late autumn 2019. Without introduction of the concerned amendments, there would be uncertainty regarding the power of the Regulator to issue its decisions after 31 December 2019.
Consequences for the renewable energy sector
The Decision neither questions nor challenges the validity of the decisions and legal acts that the Regulator has already adopted or will adopt before 31 December 2019, and hence it can be assumed that these decisions will remain in force.
However, the Decision creates uncertainty regarding the power of the Regulator to issue decisions after 31 December 2019. Hence, if the situation is not be rectified by the Parliament of Ukraine before end of December 2019, the market should expect delays in approvals of green tariffs, local content premiums and the issuing of power-generation licenses to renewable power producers by the Regulator after 31 December 2019.
In the light of this uncertainty, renewable power producers may consider, if possible, accelerating the procedures of obtaining power generation licenses and of approval of the green tariffs and local content premium before 31 December 2019.
The Decision of the Constitutional Court of Ukraine dated 13 June 2019 may have significant impact on renewable power producers, as sustainable functioning of the Regulator will be at question after 31 December 2019. However, timely adoption of the changes to the Constitution of Ukraine by the Parliament of Ukraine should resolve this situation in line with the EU's third package of energy market legislation. CMS will closely monitor any related developments and will inform you on any updates.
For more information on this eAlert and its impact on the Ukrainian energy sector, feel free to contact the following local CMS experts: Vitaliy Radchenko, Anatoliy Doludenko, Maryna Ilchuk, Anna Pogrebna, Maria Orlyk, Taras Chernikov.