Bulgartransgaz: EU Court annuls fine of more than 77 million euros imposed on Bulgarian Energy Holding for dominant position

The EU court has overturned the EC's decision in the gas case against Bulgarian Energy Holding (BEH), Bulgartransgaz and Bulgargaz, the gas operator said on October 25. It also overturns the €77,068,000 fine imposed on the Bulgarian gas companies.

The EC decision, which was annulled by the court, was related to the dominant position of the companies in the group around BEH - both in the gas infrastructure and gas supply markets in Bulgaria for the period 2010-2015.

"The court's decision concluded also that BEH and its subsidiaries had abused their dominant position. The CJEU found that, contrary to the Commission's assertions, Bulgartransgaz's conduct did not prevent third parties from gaining access to the Bulgarian gas transmission network and the underground gas storage facility Chiren. According to the Court's decision, no company could have entered the Bulgarian market, respectively gained effective access to the gas transmission network and the Chiren UGS, without access to the Romanian gas pipeline 1," Bulgartransgaz said.

In the circumstances examined in the case, the General Court also finds that the Commission has not established any abuse of a dominant position by Bulgartransgaz EAD, the gas operator added.

"Today's decision of the EU Court of Justice is yet another confirmation that Bulgartransgaz EAD has ensured all the necessary conditions for providing transparent and non-discriminatory access to third parties, both to the gas transmission network of Bulgaria and to the natural gas storage facility at Chiren," CEO Vladimir Malinov stressed.

Currently, the Company has concluded over 80 access and transmission contracts with users of the gas transmission network and 15 access and storage contracts with users of the Chiren gas storage facility.

"Bulgartransgaz EAD is a reliable and stable partner in the development and integration of the European energy market. The Company carries out the licensed natural gas transmission and storage activities in strict compliance with the applicable national and European law requirements.

"Bulgartransgaz EAD meets all independence criteria in accordance with European requirements and is certified as an independent transmission operator.

In recent years, Bulgartransgaz EAD has modernized and expanded the gas transmission infrastructure, which has enabled two-way transmission of natural gas with virtually all neighbouring countries, allowing a high level of diversification of sources and routes for natural gas supply in the region.

The Bulgarian Gas Transmission Operator is implementing a number of projects of strategic importance for Europe's energy security, including the projects of common interest to the EU on the expansion of the Chiren storage facility, the Bulgaria-Serbia interconnector, which provide the opportunity to access new alternative sources of gas in the region and increase competition between market players. In addition, the company is a 20% shareholder in the project company Gastrade S.A., implementing the LNG terminal in Alexandroupolis, Greece," the gas operator further said.

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The text of the judgment of the General Court:

At the time of the facts, the Bulgarian Energy Holding (BEH), a company wholly owned by the Bulgarian State, had several subsidiaries which were active in the energy sector, including Bulgargaz and Bulgartransgaz. Bulgargaz was the public gas supplier in the country. Bulgartransgaz managed and operated the gas transmission network used for the distribution of gas in Bulgaria. It also controlled the only natural gas storage facility in the country, situated underground in Chiren.

For a long time, Bulgaria’s supply depended almost entirely on imports of Russian gas. That gas was transported via Ukraine, then Romania, mainly through the Romanian Transit Pipeline 1, which was managed by the company Transgaz, the gas transmission network operator in Romania

From 1974, an intergovernmental agreement between Bulgaria and Romania guaranteed the conditions for the operation of the Romanian Pipeline 1. In 2005, under a new agreement, Bulgargaz was granted exclusive use of that pipeline until the end of 2011. The agreement was extended until 2016.

In 2010, the company Overgas, an operator in the gas supply market in Bulgaria, lodged with the European Commission a complaint against BEH and its two subsidiaries, alleging that they had infringed EU competition rules.

After its investigations, the Commission found, by Decision of 17 December 2018, that those companies’ conduct constituted abuse of a dominant position on the gas supply market in Bulgaria. The infringement consisted in a refusal to grant third parties, including Overgas, access to the Romanian Transit Pipeline 1, to the gas transmission network and to the gas storage facility in Chiren during the period 30 July 2010 to 1 January 2015. According to the Commission, that prevented Bulgargaz’s competitors from developing their offer on Bulgarian territory. Consequently, the Commission imposed a fine of approximately EUR 77 million on the companies concerned. Following that decision, BEH and its subsidiaries brought proceedings before the General Court of the European Union, seeking the annulment of that decision or, failing that, a reduction in the amount of the fine.

By its judgment, the General Court annuls the Commission Decision. According to the General Court, the Romanian Pipeline 1 was an essential facility for the transportation of Russian gas to Bulgaria due to the lack of any alternative. Even though Bulgargaz was not the owner of that pipeline, Bulgargaz had exclusive use of it, which took the form of a situation of control and, consequently, of Bulgargaz having a dominant position on the market in question.

The General Court nevertheless found that the Commission had not demonstrated that Bulgargaz’s conduct regarding access to the Romanian Pipeline 1 was the cause of the difficulties which third parties encountered when requesting access to that pipeline for the transportation of gas from Russia to Bulgaria.

Thus, any irregularity that might, in theory, have been committed by Bulgartransgaz in relation to the gas transmission network and the Chiren storage facility could not constitute an infringement of EU competition rules because no company could have entered the Bulgarian gas market without access to the Romanian Pipeline 1.

The General Court also finds that the Commission did not put the BEH Group in a position to argue its position fully as regards the infringement alleged against it and thus infringed its rights of defence. In those circumstances, the General Court finds that the Commission has not duly established that the BEH Group abused its dominant position on the gas supply market in Bulgaria.