European Commission v Republic of Poland [2012] EUECJ C-569/10 (20 November 2012)

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(Actions for failure to fulfil obligations – Admissibility of the action – Conditions for granting and using authorisations for the prospection, exploitation and production of hydrocarbons – Non-discriminatory access – Tendering procedure for granting authorisation – Requirements applying to the granting of authorisation – Official publication of the tendering procedure – Distinction between mining usufruct rights and concession – Separate authorisations for prospection and production)

1. In this case, the Commission seeks a declaration that the Republic of Poland has failed to comply with certain of its obligations under Article 2(2), Article 3(1), Article 5(1) and Article 5(2) of Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (‘the Directive’). (2)

2. The Republic of Poland disputes the alleged failure and submits, firstly, that the Commission’s action is inadmissible in that the grounds relied on are substantially different from those deployed at the pre-litigation stage. I shall deal first with the objection of inadmissibility and then move on to examine, in some instances only in the alternative, the grounds relied on by the Commission in support of its action against the Republic of Poland.

3. The substantive issue raised in these proceedings will allow the Court of Justice, in the context of very specific national legislation, to develop the case-law relating to access to tendering procedures for granting administrative authorisations for the commercial exploitation of publicly owned natural resources.

4. By virtue of Article 1(3) of Directive 94/22, for the purposes of the directive, ‘authorisation’ means ‘any law, regulation, administrative or contractual provision or instrument issued thereunder by which the competent authorities of a Member State entitle an entity to exercise, on its own behalf and at its own risk, the exclusive right to prospect or explore for or produce hydrocarbons in a geographical area’ and an authorisation may be granted for each activity separately or for several activities at a time.

‘1. Member States retain the right to determine the areas within their territory to be made available for the exercise of the activities of prospecting, exploring for and producing hydrocarbons.

2. Whenever an area is made available for the exercise of the activities set out in paragraph 1, Member States shall ensure that there is no discrimination between entities as regards access to and exercise of these activities.

However, Member States may refuse, on grounds of national security, to allow access to and exercise of these activities to any entity which is effectively controlled by third countries or third country nationals.’

6. By virtue of Article 3(1) of the Directive, the Member States must take ‘the necessary measures to ensure that authorisations are granted following a procedure in which all interested entities may submit applications’. Article 3(5)(b) provides that ‘the grant of an authorisation to an entity having another form of authorisation where the possession of the latter authorisation implies a right to the grant of the former authorisation’ ‘shall not be considered as the grant of an authorisation within the meaning of paragraph 1’.

7. By virtue of Article 5 of Directive 94/22, Member States must take the necessary measures to ensure that:

(b) the way in which they propose to prospect, to explore and/or to bring into production the geographical area in question;

(c) if the authorisation is put up for sale, the price which the entity is prepared to pay in order to obtain the authorisations;

(d) if, following evaluation under the criteria (a), (b) and, where applicable, (c), two or more applications have equal merit, other relevant objective and non-discriminatory criteria, in order to make a final choice among these applications.

The criteria shall be drawn up and published in the Official Journal of the European Communities before the start of the period for submission of applications. Member States which have already published the criteria in their official journals may limit the publication in the Official Journal of the European Communities to a reference to the publication in their official journals. However, any change in criteria shall be published in full in the Official Journal of the European Communities;

(2) the conditions and requirements concerning the exercise or termination of the activity which apply to each type of authorisations by virtue of the laws, regulations and administrative provisions in force at the time of submission of the applications, whether contained in the authorisation or being one of the conditions to be accepted prior to the grant of such authorisation, are established and made available to interested entities at all times. In the case provided for in Article 3(2)(a), they may be made available only from the date starting from which applications for authorisation may be submitted;

(3) any changes made to the conditions and requirements in the course of the procedure are notified to all interested entities;

(5) any entity whose application for an authorisation is unsuccessful is, if the entity so wishes, informed of the reasons for the decision.’

8. In its action for failure to fulfil obligations, the Commission claims that the Polish Geological and Mining Law of 4 February 1994 (3) is incompatible with European Union law.

9. By virtue of Article 7 of that law, mineral deposits that do not form part of the land are the property of the Treasury, which may dispose of its right therein by creating ‘mining usufruct rights’ (paragraphs 1 and 2).

10. Pursuant to Article 2 of the Law of 2 July 2004 on freedom of economic activity, (4) the prospection, exploration and production of mineral deposits are economic activities governed by that law.

11. The Republic of Poland has stated (at point 25 of its defence) that under the combined provisions of the Law on freedom of economic activity and the Geological and Mining Law, a concession from the Minister for the Environment is required in order to prospect, explore for or produce hydrocarbons.

12. Thus, in Poland, the ‘authorisation’ to carry out those activities, within the meaning of Directive 94/22, would be made up of two elements: an agreement creating ‘mining usufruct rights’ on the one hand and, on the other, an administrative concession.

13. In accordance with Article 9 of the Geological and Mining Law, the holder of mining usufruct rights may, to the exclusion of other parties, prospect, explore and produce a specified mineral, subject to the restrictions set out in the agreement. The holder may also ‘dispose of the rights’, subject to the same restrictions.

14. Article 10 of the Geological and Mining Law provides that mining usufruct rights shall be created ‘by way of an agreement, for compensation and subject to the granting of a concession’ (paragraph 1). The mining usufruct rights expire in the event of expiry or withdrawal of the concession (paragraph 3).

15. Article 11(2) of the Geological and Mining Law provides that: ‘Without prejudice to Article 12(1), the creation of mining usufruct rights covering the prospection, exploration for and exploitation of natural gas, oil and its natural derivatives ... shall be preceded by a competitive tendering procedure.’

16. Article 12(1) of the Geological and Mining Law, to which Article 11 refers, provides that: ‘An undertaking that has explored and documented mineral deposits belonging to the Treasury and has prepared geological documents to the level of accuracy required for the granting of a concession for production of the mineral, may apply for the grant of mining usufruct rights with priority over other parties.’ By virtue of Article 12(3), such rights will expire two years after the date of receipt of the document by which the relevant administrative authority accepted the geological documents in question.

17. Article 15(1) of the Geological and Mining Law provides that a concession is required for: ‘(1) the prospection or exploration of mineral deposits, (2) the exploitation of minerals ...’. Article 15(2) states that matters not regulated in the Geological and Mining Law are to be regulated by the Law on freedom of economic activity.

18. By virtue of Article 17(1) of the Geological and Mining Law, the granting of a concession may be conditional on the provision of a guarantee capable of meeting any claims that may arise as a result of the activities carried out under the concession, if this is warranted by particularly important interests of State or particularly important public interests, specifically interests relating to environmental protection.

19. By virtue of Article 18(1) of the Geological and Mining Law, one of the items to be included in an application for a mining concession is the number of the applicant’s registration in the register of undertakings or in the register of economic activities (Article 18(1)(2b)). Furthermore, Article 20(2) provides that the aforementioned application must also include evidence of the applicant’s entitlement to use the geological documentation for the purposes of seeking a concession (Article 20(2)(1)).

20. Finally, Article 47(1) of that law provides that ‘the Treasury shall be entitled to the information obtained as a result of carrying out geological work’, and Article 47(2) goes on to provide that the Treasury may dispose of that right, subject to the provisions set out in Article 47(3), which are that: ‘The person who has borne the cost of geological work carried out on the basis of decisions made under this Law shall have the exclusive right to use the geological information, free of charge, for scientific and research purposes and to carry out activities regulated hereunder. This right shall expire five years from the date on which the decision authorising the work from which the information was derived or authorising another activity regulated hereunder or under other regulations ceases to have effect. Unless otherwise stipulated in a concession or decision approving a programme of geological works, a person entitled to use the geological information acquired in this way may make it available to other parties.’

21. On 23 March 2007, the Commission sent Poland a letter of formal notice drawing attention to the failure to fulfil its obligations under Article 2(2), Article 3(1), Article 5(1) and Article 5(2) of Directive 94/22. Poland replied by letter of 25 May 2007, in which it maintained that, under Polish law, the authorisation under Directive 94/22 is made up of the two legal mechanisms provided for in the Geological and Mining Law: the ‘mining usufruct right’ and the concession, the ‘mining usufruct right’ being a subjective right, whose existence is not sufficient in order to carry out the activities referred to in the Geological and Mining Law, whereas a concession relating to one of the activities regulated under that Law is a requirement of authorisation to exercise a subjective right in a particular manner.

22. On 31 January 2008, the Commission sent the Republic of Poland its reasoned opinion restating all the infringements hitherto alleged. The Polish Government replied in a letter of 20 March 2008. In it, the Republic of Poland asserted that ‘as part of the work done on the new Geological and Mining Law, new principles have been defined for the granting of concessions for the prospection, exploration and production of hydrocarbons in Poland. The new provision will replace the provisions giving rise to the concerns of the European Commission regarding the procedure for granting mining usufruct rights’.

23. After sending the Commission a draft of the new Geological and Mining Law on 12 June 2008, the Polish Government informed it, in a letter of 27 April 2010, that the draft law had been sent to the Polish parliament on 18 November 2008 but that, owing to the length and complexity of the parliamentary debates, it had not been possible to adopt it during the course of 2009. (5)

III – The procedure before the Court of Justice: forms of order sought by the parties

24. On 3 December 2010, the Commission brought an action for failure to fulfil obligations before the Court of Justice under Article 258 TFEU. This was followed by the exchange of defence, reply and rejoinder between the applicant and the defendant Member State.

– declare that, by not adopting the measures necessary to ensure access to activities relating to the prospection, exploration and production of hydrocarbons free of all discrimination as between interested undertakings and the grant of authorisations to carry out those activities in accordance with a procedure in which all interested undertakings may submit applications and on the basis of criteria published in the Official Journal of the European Union before the beginning of the period in which applications must be submitted, the Republic of Poland has failed to fulfil its obligations under Article 2(2), Article 3(1), Article 5(1) and Article 5(2) of Directive 94/22;

– declare the action inadmissible in its entirety or, in the alternative, dismiss it in its entirety;

27. The Polish Government has raised an objection to admissibility on grounds of what it considers to be appreciable differences between the heads of complaint relied on by the Commission at the pre-litigation stage and the pleas in law set out in the application for failure to fulfil obligations.

28. In accordance with settled case-law, the subject-matter of an action for failure to fulfil obligations is delimited by the procedure provided for by Article 258 TFEU, so that the application must be based on the same grounds and pleas as the reasoned opinion. (6) However, that requirement cannot be stretched so far as to mean that in every case the statement of complaints set out in the operative part of the reasoned opinion and the form of order sought by the action must be exactly the same, provided that the subject-matter of the proceedings, as defined in the former document, has not been extended or altered. (7)

29. Therefore, in order to determine whether the plea put forward by the Polish Government should be upheld, I shall now compare the pleas raised by the Commission, as they appear in the application, with the contents of the reasoned opinion (A), and then go on to examine, in the light of case-law of the Court of Justice, the possible significance of the differences noted in terms of the admissibility of the action (B).

A – The pleas set out in the application compared to the contents of the reasoned opinion

30. Under the first pleas in law in the application, relating to an alleged infringement of the first subparagraph of Article 2(2) of Directive 94/22, which provides for non-discriminatory access to the activities of prospecting, exploration for and production of hydrocarbons, the Commission states that there is a twofold discrimination.

31. First, the Commission refers to discrimination against undertakings established in other Member States, inasmuch as that the application for a concession must be accompanied by the number of registration in the Polish register of undertakings or register of economic activities (Article 18(1)(2b) of the Geological and Mining Law). It is to be noted at this point that this first part of the first plea does not raise any issues of admissibility, for it is expressly mentioned at point 78 of the reasoned opinion.

32. Secondly, the Commission refers to potential discrimination vis-à-vis undertakings that, while they are interested in hydrocarbon production, have not previously carried out exploration works in the area and do not, therefore, have exclusive rights to the geological documentation. The Commission’s application alleges that the combined effect of Article 20(2)(1) and Article 47(3) of the Geological and Mining Law is to make it difficult for these undertakings to obtain a production concession, even if their tender is the most advantageous.

33. This head of complaint is not expressly referred to in the reasoned opinion, which, in effect, only indicates in broad terms that the second stage of the authorisation process (relating to the concession) does not involve a competitive tendering procedure and mentions in passing the requirement to provide evidence of the right to use the geological documentation (see point 76 of the reasoned opinion), but does not explain how the importance given to this right can give rise to the discrimination of which the Commission complains.

34. The second head of complaint in the application, relating to a possible infringement of Article 3(1) of Directive 94/22, which lays down the obligation to use a procedure for granting authorisations ‘in which all interested entities may submit applications’, falls into two parts.

35. First, the Commission considers that the requirement under Article 3 of Directive 94/22 that authorisation be granted by means of a tendering procedure is met only in relation to the first stage (the ‘mining usufruct rights’), but not in relation to the second stage, since the concession is awarded using an ‘entitlement-based’ procedure. Moreover, the fact that Article 12 of the Geological and Mining Law gives priority to the person entitled to use the geological documentation is also contrary to the requirement that a competitive tendering procedure be followed.

36. The reasoned opinion develops the argument that the tendering procedure applies only to the mining usufruct rights, but does not mention the priority rights in Article 12 or analyse their possible consequences.

37. Secondly, the Commission takes the view that the Polish legislation is in breach of the requirement that the notice of invitation to tender be published in the Official Journal of the European Union, and refers too to the fact that the documentation must be submitted in Polish (Article 53(4) of the Geological and Mining Law), which could, in the Commission’s view, give rise to discrimination. This complaint does not appear in the reasoned opinion.

38. In the third plea in law in the application relating to a possible infringement of Articles 5(1) and 5(2) of Directive 94/22, which set out the criteria for granting authorisations, the Commission claims that, for various reasons, the evaluation criteria do not comply with the requirements of the directive.

39. First, the Commission states that the Polish regulation of 2005 puts the criteria relating to the technical, financial and ‘technological’ capability of the undertaking (referred to in Article 5(1)(a) and (b) of Directive 94/22) ‘on an equal footing’, using a purely financial criterion: the price that the undertaking is prepared to pay for the authorisation. The reasoned opinion does not develop this particular head of complaint, which was, in any event, withdrawn by the Commission at the hearing.

40. Secondly, the Commission states that the granting of the concession may in some cases be conditional on the provision of a guarantee (Article 17 of the Geological and Mining Law), which would, in the Commission’s estimation, be contrary to Directive 94/22. Points 68 and 73 of the reasoned opinion refer to this plea in law.

41. Finally, the Commission takes the view that the Polish legislation does not properly transpose the requirement to publish the evaluation criteria in the Official Journal (Article 5(1) of Directive 94/22), or ensure that they are ‘made available to interested entities at all times’ (Article 5(2) of Directive 94/22). This head of complaint is covered, indirectly, in point 68 et seq. of the reasoned opinion.

B – The differences noted and their relevance for the purpose of the admissibility of the action

42. In the light of the foregoing analysis, I shall say straight away that, in my view, the first part of the first pleas (entry in the register) and the second and third parts of the third plea (the guarantee and the publication of the evaluation criteria) are clearly admissible, for they are referred to in both the application and the reasoned opinion and in the same terms.

43. On the other hand, I take the view that the second part of the first plea in law and the second plea in its entirety should both be declared inadmissible.

45. As regards, first, the second part of the second plea (which, as we have seen, relates to the failure to fulfil the obligation to publish the notice of the invitation to tender in the Official Journal and the filing of documentation in Polish), it ought, in my view, to be declared inadmissible because, as I have already mentioned, the reasoned opinion contains no direct or indirect reference to these specific claims. This means that their inclusion by the Commission in its application represents the introduction by surprise of a plea in relation to which the Republic of Poland has not had an opportunity of giving its views during the pre-litigation stage or, more importantly, of adopting measures at that time which might possibly, in respect of this particular issue, have prevented the action ultimately brought before the Court of Justice.

46. In relation to the second part of the first plea and the first part of the second plea, which it is convenient to address together, it should be noted first of all that the reasoned opinion focuses on the idea that the Polish system is in breach of Directive 94/22 in that it provides for a tendering procedure only in respect of the first stage in the authorisation process (the creation of ‘mining usufruct rights’), but not in respect of the second (the concession itself), to which an entitlement-based procedure applies. In these circumstances, according to the reasoned opinion, the Polish system imposes certain further conditions once the truly competitive part of the procedure for granting the authorisation has been completed, as a result of which the candidate best placed after the first stage might be excluded from the second and final stage, which is the concession sensu stricto (point 64 of the reasoned opinion).

47. According to the reasoned opinion, the issue in relation to this point is therefore that there is no guarantee that the candidate selected under the competitive tendering procedure set up for the purposes of creating the mining usufruct rights will ultimately be entitled to carry out the activity which is subject to the concession (point 75 of the reasoned opinion).

48. The analysis contained in the application filed by the Commission, however, is appreciably different: it reiterates the idea that the concession is granted without a tendering procedure, but focuses primarily on the fact that the Polish legislation gives an exclusive right of use, with priority over others, to anyone who has prepared geological documentation, arguing that these provisions mean that the requirement that a tendering procedure be carried out can be completely avoided, since the holder of a pre-existing mining usufruct right in relation to exploration and prospection is clearly in an advantageous position when it comes to being granted the usufruct right in relation to production and, therefore, when it comes to ultimately obtaining the administrative concession for exploitation or production. (8) This idea, which is fundamental to the application, does not, however, appear in the reasoned opinion, which does not even refer specifically to Article 12 and Article 47(3) of the Geological and Mining Law, (9) which, as I say, are both fundamental to the line of argument set out in first and second heads of complaint in the action for failure to fulfil obligations.

49. Admittedly, as I have already mentioned, the case-law does not require the statement of complaints set out in the operative part of the reasoned opinion and the form of order sought by the infringement action to be exactly the same. Nevertheless, it is my view that the line of argument based on Article 12 and Article 47(3) of the Geological and Mining Law is sufficiently fundamental to the structure of the two first complaints to consider that its introduction into the application is tantamount to altering or extending the subject-matter of the dispute delimited in the reasoned opinion. To argue, as the Commission does, that it merely constitutes new reasoning or further explanation is, I think, going too far.

50. According to the case-law, the purpose of the pre-litigation procedure is ‘to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the objections formulated by the Commission … The proper conduct of that procedure constitutes an essential guarantee required by the Treaty not only in order to protect the rights of the Member State concerned, but also so as to ensure that any contentious procedure will have a clearly defined dispute as its subject-matter’. (10)

51. It is therefore my opinion that the definition of the subject-matter of the dispute has altered significantly between the pre-litigation stage and the stage of proceedings before the Court of Justice. This has been to the detriment of legal certainty and the Republic of Poland’s right to a fair hearing because, in the course of the pre-litigation procedure, it was not notified ‘coherently and precisely’, as required by the case-law, (11) that the priority and the exclusive rights set out in Articles 12 and 47 of the Geological and Mining Law infringed the requirements of Directive 94/22. This might have prevented it from complying with its obligations under EU law while it was still possible to do so, and, later, from preparing a proper defence of its legal system.

52. It follows from all the foregoing, to my mind, that the objection of inadmissibility must be dismissed in so far as it affects the first part of the first plea in law and the second and third parts of the third plea.

53. On the other hand, the objection ought to succeed in relation to the second part of the first plea and the second plea in its entirety, which should be declared inadmissible.

54. Nevertheless, and merely in the alternative so far as concerns the pleas that are in my view inadmissible, I shall now proceed to analyse all three pleas in their entirety, with the single exception, obviously, of the first part of the third plea, expressly withdrawn by the Commission in the course of the hearing.

A – Preliminary observations: a short description of the legislation in question

55. Before going on to analyse the pleas alleging failure to fulfil obligations, I think it is important to pause to describe the Polish legislation which has given rise to these infringement proceedings.

56. At the time the reasoned opinion was issued, the Polish system for access to the activities of prospecting, exploring for and producing hydrocarbons was essentially governed by the Geological and Mining Law of 4 February 1994 and its subsequent amendments.

57. The principal characteristics of the system established by this legislation appear to be the existence of two distinct entitlements (the ‘mining usufruct rights’ and the concession) which, together, constitute the ‘authorisation’ under Directive 94/22, and the priority given, when authorisations for production are granted to the undertaking which has already explored and documented particular deposits.

58. Thus, in order to carry out mining activities consisting of prospecting, exploring for and producing hydrocarbons, it is necessary to obtain both mining usufruct rights and a concession. The two entitlements are inextricably linked, in that, for example, if the concession is withdrawn or expires, the usufruct rights also terminate (Article 10(3) of the Geological and Mining Law).

59. The agreement under which the ‘mining usufruct right’ is created constitutes a form of ‘civil entitlement’. As a general rule, the grant of that right necessitates the arranging of the relevant tendering procedure (Article 11(1) and Article 11(2) of the Geological and Mining Law). By way of exception, however, an undertaking that has explored, and prepared geological documentation in respect of, particular deposits (presumably pursuant to an earlier authorisation for prospection and exploration) may request the granting of priority mining usufruct rights for the production of hydrocarbons from those deposits (on an exclusive basis) for a period of two years (Article 12 of the Geological and Mining Law). (12)

60. In any event, it seems clear that an undertaking to which mining usufruct rights have been granted cannot immediately carry out mining operations but must apply for an ‘administrative entitlement’ or concession.

61. The grant of the concession is not preceded by any tendering procedure whatsoever. In practice, only the undertaking to which the usufruct rights have been granted can apply for it and, as a result, the procedure that follows is limited to verifying the requirements and documentation specified under the Polish mining legislation. Of these requirements, I should highlight the one that is now being contested, relating to prior registration of the applicant in the register of undertakings or the register of economic activities (Article 18(1)(2b) of the Geological and Mining Law) and, in some cases, the requirement relating to the provision of a guarantee, which is also disputed in this case (Article 17 of the Geological and Mining Law).

62. In addition, if the concession sought is for production, the undertaking must hold the rights to use the geological documentation to which I have already referred (Article 20(2)(1) of the Geological and Mining Law). In this regard, under the Polish legislation, the geological documentation generally belongs to the Treasury (Article 47(1) of the Geological and Mining Law), but the applicant undertaking may have exclusive rights to use such documentation as a result of previous explorations. If that undertaking does not wish to exploit the deposits on its own account, it may sell its exclusive rights to the geological documentation to another undertaking. After five years the right of use reverts to the Treasury (Article 47(3) of the Geological and Mining Law).

B – The first plea in law: Infringement of the first subparagraph of Article 2(2) of Directive 94/22 providing for non-discriminatory access to the activities of prospecting, exploring for and producing hydrocarbons

64. In the first part of the first plea, the Commission argues that, by requiring, in Article 18(2)(2b) of the Geological and Mining Law, the application for the concession to contain the number of the applicant’s entry in the register of undertakings or the register of economic activities in Poland, the Polish legislation gives rise to discrimination vis-à-vis entities established in other Member States, which may not apply for a concession without first registering in Poland.

65. In this regard, the Commission cites Case C-338/09 Yellow Cab. (13) In that judgment, the Court stated that ‘requiring an economic operator, established in another Member State and wishing to obtain authorisation to operate a regular bus service in the host Member State, to hold a seat or another establishment in the territory of that State even before authorisation has been granted to operate that service has a dissuasive effect. An economic operator exercising ordinary care would not be willing to make investments, which may well be significant, if completely unsure whether such authorisation will be granted or not.’ (14) For this reason, and as the objectives claimed by the Austrian government in that case did not justify such a requirement, the Court of Justice held that it constituted a restriction of the freedom of establishment, unless it were applied after authorisation to operate had been granted and before the business operator began to operate the service. (15)

66. In this case, the relevant article of the Geological and Mining Law provides that proof of registration must accompany the application for the concession. The Polish Government has argued that at that stage in the application it is virtually ‘certain’ that operations will go ahead, because the procedure for granting the concession is purely administrative and applications are submitted only by those who have already obtained mining usufruct rights by means of an earlier tendering procedure.

67. However, the fact is that, even once mining usufruct rights have been obtained, an undertaking wishing to carry out mining operations must still meet other requirements if it is to be granted a concession. As I have already had occasion to mention, one such is the requirement to provide a guarantee and another is the requirement, in the case of production, to prove entitlement to use the geological documentation. In that the applicant may not meet these requirements, it is reasonable to suppose that at this stage there is still a level of uncertainty such that the dissuasive effect referred to in Yellow Cab cannot be discounted.

68. I am therefore of the opinion that the first part of the first plea ought to be upheld.

69. In the second part of the first plea, the Commission argues that there is also discrimination vis-à-vis entities that, while wishing to carry out hydrocarbon production activities, have not conducted explorations in the area before and therefore do not have exclusive rights to use the geological documentation. This is so because, in the Commission’s view, the combined effect of Article 20(2)(1) and Article 47(3) of the Geological and Mining Law makes possession of the geological documentation a prerequisite for applying for the concession.

70. This second part of the first plea covers part of the same ground as the first part of the second plea, and I shall therefore deal with them together.

C – The second plea: Infringement of Article 3(1) of Directive 94/22 requiring the adoption of a procedure for granting authorisations that permits all interested entities to applications

1. The first part of the second plea (partly overlapping with the second part of the first plea)

72. In the first part of the second plea, the Commission argues that the requirement in Article 3 of Directive 94/22 to hold a tendering procedure before an authorisation is granted is met only as regards the first stage (creation of ‘mining usufruct rights’) but not in relation to the second, since the concession is granted under an ‘entitlement-based’ procedure. Furthermore, according to the Commission, the priority given to the holder of the rights to the geological documentation is also contrary to the requirement to follow a tendering procedure.

73. In this regard, the Commission concedes that there is no reason why the authorisation should not be broken down into two parts, but goes on to specify that this can only be so if each part involves a tendering procedure.

74. The response of the Republic of Poland is that the existence of a tendering procedure in respect of the granting of the mining usufruct rights is sufficient, as the procedure for granting the concession is in the nature of a mere ‘formality’, albeit compulsory, involving only the undertaking to which the mining usufruct rights have been granted.

75. On that basis, the Polish Government takes the view that there is nothing to prevent a system of two-stage authorisations where priority rights are granted as part of the second stage. According to the Polish Government, this possibility falls within Article 3(5)(b) of Directive 94/22, which states that ‘the grant of an authorisation to an entity having another form of authorisation where the possession of the latter authorisation implies a right to the grant of the former authorisation’ ‘shall not be considered as the grant of an authorisation’ (and does not, therefore, require a tendering procedure).

76. The Commission contends that this provision refers to an entirely different factual situation: that of an authorisation for the production of hydrocarbons that was granted by means of a ‘generally applicable measure affecting many entities, such as a law or a regulation’ and a series of ‘later individual authorisations contained in administrative decisions adopted on the basis of the earlier regulation or law’, which are the result of the former authorisation and do not, therefore, require a tendering procedure.

77. At the hearing, the Commission could not provide clarification as to the circumstances in which this type of situation might arise and its line of argument in this regard does not strike me as particularly convincing. However that may be, I do not think that Article 3(5)(b) of the Directive is applicable in this case, inasmuch as the twofold priority provided for in the legislation means, as we shall see, that even in respect of the first stage in the process there is no certainty that a tendering procedure will take place.

78. In fact, Article 12, Article 20(2)(1) and Article 47(3) of the Polish Geological and Mining Law stipulate that a person who has already conducted exploration and prospection activities is given priority and exclusive rights of use. On the one hand, when it comes to obtaining mining usufruct rights, the Law gives priority to an undertaking that has prepared geological documentation (Article 12(1)); and on the other, the Law also confers on that undertaking exclusive rights to use that documentation (Article 47(3)), without which it is not possible even to apply for the concession needed for production (Article 20(2)(1)).

79. In effect, Article 12 of the Geological and Mining Law gives priority – for a period of two years and over any other person – in seeking the creation of mining usufruct rights to the person who has explored and documented mineral deposits and prepared the relevant geological documentation.

80. Furthermore, by virtue of Article 47(3) of the Law, an undertaking that has borne the costs of the geological work of prospecting and exploring is exclusively entitled for a period of five years to use the geological documentation which it has prepared. As a result, during that period that undertaking can be virtually certain of being granted a concession since, pursuant to Article 20(2)(1) of the Law, the right to use the geological documentation is an essential requirement when making the relevant application for a concession. In effect, only persons to whom this documentation is available really have access to the second stage in the authorisation process.

81. Thus, although another undertaking might be granted the mining usufruct rights under the tendering procedure set up for the purpose, (16) in practice, the combination of Articles 47(3) and Article 20(2)(1) of the Law mean that, during that five-year period, the undertaking holding the usufruct rights can obtain the concession only if the undertaking with exclusive rights to the geological documentation agrees to allow the former to use it. In this regard, it should be noted that, as was established at the hearing, these rights can be bought and sold. Suffice it to say, for the present purposes, that if neither of these circumstances applies, then the mining usufruct rights obtained by that undertaking pursuant to the tendering procedure will serve no purpose.

82. The Polish Government seeks to justify this outcome by arguing that the exclusive rights to the geological documentation and the priority given to the holder of such rights constitute fair remuneration for the investment made at the earlier prospecting and exploration stage.

84. Much as it may seem fair that the person who has borne the costs involved in preparing the geological documentation should be remunerated, that investment may in no circumstances be rewarded in such a way as to distort the authorisation procedure to the point of rendering illusory the tendering procedures required under Directive 94/22.

85. That is, or at least may be, what happens if the Polish system is applied. The interplay of priorities and exclusive rights introduced by the Geological and Mining Law may give rise to a situation in which the holder of the exclusive rights to the geological documentation obtains the mining usufruct rights without a genuine competitive tendering procedure being held. In fact, it would not be feasible to follow such a procedure if the priority referred to in Article 12(1) means – as the term ‘priority’ would, on the face of it, suggest – a true preferential right to the creation of the usufruct.

86. It would be a different matter if the ‘priority’ were taken to mean that the investment in the preparation of the geological documentation constitutes a positive factor to be taken into account in the tendering procedure; a positive factor for evaluation, perhaps, but certainly not to the extent of determining the outcome of the tendering procedure. Giving this factor its proper weight may constitute reasonable remuneration for the investment, without going as far as the case put by the Polish Government.

87. In this regard, we should bear in mind that ownership of exclusive rights to the geological documentation may not be as central to the authorisation process as it is under the Polish system. Ownership of such rights does, of course, demonstrate that the holder has the skills needed to prepare geological documentation. Clearly, however, such skills are not necessarily in themselves sufficient to demonstrate the skills relevant for the purposes of granting an authorisation to exploit mineral resources. It seems to me obvious that, basically, the Polish system attributes too much importance to the position of undertakings whose main capability is the production of geological documentation, with the position of other undertakings which can also demonstrate capability in the area of mining being entirely subordinated to the interests of the former.

88. So, the Polish system of ‘authorisation’ within the meaning of Directive 94/22 comprises two stages (the creation of the mining usufruct rights and the concession itself), the outcome of which may be dictated entirely by the exercise of exclusive rights to the geological documentation that is needed in order to obtain the actual authorisation to exploit the mineral resources. Those exclusive rights are granted to the undertaking that has obtained geological documentation through exploration and investigation which, in accordance with Article 33(1) of the Geological and Mining Law, do not always require a concession and would therefore not be the result of a tendering procedure.

89. Consequently, given that in certain circumstances the Polish legislation allows the authorisation required for the activities of prospecting, exploring for and producing to be granted following a procedure which does not involve a genuine tendering procedure, I am of the opinion that the first part of the second plea and the second part of the first plea in the Commission’s application should be upheld in their entirety.

90. In the second part of the second plea, the Commission argues that the Polish legislation does not satisfy the requirement that the notice of invitation to tender be published in the Official Journal of the European Union. It further maintains that the fact that the tender documents must be submitted in Polish could give rise to discrimination.

91. As far as publication is concerned, it seems that this requirement is in fact met in relation to the granting of the mining usufruct rights. The procedure for granting the concession, on the other hand, is not subject to the same requirement of publication, probably precisely because it is not a competitive procedure. In any event, the fact that publication is not a part of this procedure (amounting to a lack of transparency) constitutes, in itself, a further infringement of the directive, which should, in my view, be confirmed by the Court of Justice.

92. On the subject of the requirement relating to the language of the tender documents, the Polish Government points out that EU law does not require the authorities of the Member States to accept documents in a language other than their official language and I can only agree with this point of view.

93. Consequently, I am of the opinion that the second part of the Commission’s second plea ought to be upheld in so far as it alleges that the procedure for granting the concession is not made subject to publication in the Official Journal of the European Union.

D – The third plea: infringement of Article 5(1) and Article 5(2) of Directive 94/22, setting out the criteria for granting authorisations

94. The third plea was originally divided into three parts, the first of which was expressly withdrawn by the Commission at the hearing. I shall, therefore, confine myself to the second and third parts which, as I have already mentioned, do not in my view present any problems of admissibility.

95. The Commission states that, by virtue of Article 17 of the Polish Geological and Mining Law, the granting of a concession may in some cases be made conditional on the provision of a guarantee and, according to the Commission, this requirement is not provided for in Directive 94/22.

96. First, the Commission takes the view that justification for requiring a guarantee cannot be found in the fact that, by virtue of Article 5(1)(a) of Directive 94/22, Member States must evaluate the financial capability of those participating in tendering procedures. In particular, the Commission claims that the Polish legislation refers to this requirement in vague terms, stating that the competent authority may impose it when this is warranted by ‘particularly important interests of State or particularly important public interests, specifically interests relating to environmental protection’ (Article 17(1) of the Geological and Mining Law).

97. Secondly, the Commission maintains that an adequate basis for a financial requirement of this nature is not provided by Article 6(2) of the directive either, which allows Member States, in certain circumstances (such as for reasons of national security, public safety, public health or protection of the environment), to impose ‘conditions and requirements on the exercise’ of the activities subject to authorisation. In the Commission’s estimation, this provision refers to conditions for the exercise of the activities and not to requirements for the granting of the authorisation.

98. In my view, although, admittedly, the wording of Article 6(2) of Directive 94/22 is potentially confusing (in that it refers to ‘conditions and requirements on the exercise’ of the activities subject to authorisation), when read in conjunction with Article 6(1), it can be concluded that, in short, it refers to requirements for ensuring that the entity applying for the authorisation is capable of performing the activity.

99. Article 6(1) refers back to the conditions set out in Article 5(2) of the Directive, which mentions ‘conditions and requirements concerning the exercise ... of the activity which apply to each type of authorisations by virtue of the laws, regulations and administrative provisions in force at the time of submission of the applications, whether contained in the authorisation or being one of the conditions to be accepted prior to the grant of such authorisation’, (17) and Article 6(2) does not appear to refer solely to requirements applying at a later time, when the authorisation has already been granted.

100. Furthermore, such a distinction is completely meaningless in a legal context such as this. I therefore take the view that the provisions of Article 17(1) of the Geological and Mining Law could be a legitimate application of Article 5(1)(a) or of Article 6(2) of Directive 94/22, to the extent that the requirement to provide a guarantee is justified by the public interest (to which the latter provision refers in a general sense).

101. Moreover, the requirement of a guarantee to cover any liability that might be caused by carrying out the activity seems to me to be a measure proportionate to the objective of ensuring that the entity has the requisite ‘financial capability’ and to address the need to protect a ‘particularly important’ public interest.

102. I think, therefore, that the second part of the third plea ought not to be upheld.

103. Lastly, the Commission considers that Polish law has not correctly transposed the requirement of publishing the evaluation criteria in the Official Journal ‘before the start of the period for submission of applications’ (Article 5(1) of Directive 94/22) and that it does not ensure that ‘the conditions and requirements concerning the exercise or termination of the activity’ are ‘made available to interested entities at all times’ (Article 5(2) of the directive).

104. First, the Commission takes the view that the Republic of Poland has not adopted the necessary measures to ensure clear, effective publishing in the Official Journal of the European Union of the criteria for evaluating tenders, for although regulations exist expressly providing for such publication, in practice the Polish Government has dealt with this requirement by simply publishing ‘the three categories of criteria for evaluating tenders’ and leaving the specific content of those criteria to be determined in a document referred to as ‘detailed conditions for the granting of mining usufruct rights in connection with the prospection and exploitation of oil and natural gas deposits in certain concession areas’, which can be obtained by applying to the relevant department of the Ministry of the Environment.

105. Secondly, the Commission maintains that notification of detailed information concerning the conditions for carrying out the economic activity subject to authorisation takes place only once the open procedure for granting the concession is under way. Such notification is therefore ineffective, for the entity awarded the mining usufruct rights (which, according to the Polish Government, will automatically be awarded the concession) could not have been aware, at the time of the tendering procedure, of all the conditions applying to the exercise of the activity.

107. With specific regard to the failure to transpose the requirement to publish the evaluation criteria in the Official Journal (Article 5(1) of Directive 94/22), I am of the opinion that Polish law is not sufficiently clear on this point, and that this has resulted in less than strict compliance with the requirement of publication, which has been limited to no more than the publishing of a list of the categories of evaluation criteria rather than of a more detailed explanation of the content of such criteria.

108. I therefore take the view that the third part of the third plea must be upheld.

109. Under Article 138(3) of the Rules of Procedure of the Court of Justice, where the action succeeds in part the parties are to bear their own costs.

– declare inadmissible the second part of the first plea in law and the whole of the second plea in law;

– in the alternative, declare that, by not adopting the measures necessary to ensure access to activities relating to the prospection, exploration and production of hydrocarbons should be gained by means of a tendering procedure in which all interested undertakings may submit applications, on the basis of criteria published in the Official Journal of the European Union before the start of the period in which applications must be submitted, the Republic of Poland has failed to fulfil its obligations under Article 2(2), Article 3(1), Article 5(1) and Article 5(2) of Directive 94/22;

3 – As amended by the Law of 22 April 2005 in order to bring Polish law into line with the provisions of Directive 94/22 following Poland’s accession to the European Union (Dz. U. 2005 No 228, item 1947).

6 – See, for example, Case C-33/04 Commission v Luxembourg [2005] ECR I-10629, paragraph 36.

7 – Case C-139/00 Commission v Spain [2002] ECR I-6407, paragraph 19; Case C-433/03 Commission v Germany [2005] ECR I-6985, paragraph 28; and Case C-484/04 Commission v United Kingdom [2006] ECR I-7471, paragraph 25.

8 – See, for example, points 41 to 51 and 64 to 68 of the Commission’s application.

9 – The application makes only general references to ‘Articles 7 to 29’ and ‘Articles 15 to 21’ of the Geological and Mining Law (points 26 and 59, respectively, of the Commission’s application).

10 – Case C-456/03 Commission v Italy [2005] ECR I-5335, paragraphs 36 and 37.

11 – See, for example, Case C-186/06 Commission v Spain [2007] ECR I-12093, paragraph 18. This judgment held that one of the pleas in the Commission’s action was inadmissible in that the Commission changed the grounds in comparison to those stated in the context of the pre-litigation procedure, in breach of the aforementioned requirements of coherence and precision.

12 – There are also geographical areas in which mining usufruct rights are granted without the need for competitive tendering. This is not under consideration in this action and appears to fall within Article 3(3) of the directive.

16 – A situation which, in practice, can arise only if the undertaking which has prepared the geological documentation decides not to tender and hence not to take advantage of the two-year priority accorded to it under Article 12(1).

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> European Commission v Republic of Poland [2012] EUECJ C-569/10 (20 November 2012) URL: http://www.bailii.org/eu/cases/EUECJ/2012/C56910.html Cite as: [2012] EUECJ C-569/10

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