A recent decision of the Bulgarian Constitutional Court proclaims a state fee that has cost wind and solar energy producers about EUR 25.6 million (ca. USD 34,3 million) unconstitutional.

The fee in question was introduced in Bulgaria in December 2013, with effect from 1 January 2014.  The legislator did not provide grounds what required the collection of the new fee and stating of the grounds is obligatory in Bulgaria.  It was further not regulated how the accumulated funds shall be spent by the Government.  In addition to these incompliances, the legislative procedure was not duly applied, the state fee was proposed and voted without any consultations with industry experts and the opposition in the Parliament, and its amount was not based on any prior feasibility study.  According to the renewable energy producers, the only purpose of the legislator was to decrease the Feed-In-Tariffs, applicable to wind and solar energy production, by 20%.

The Bulgarian President strongly opposed this act of the Parliament.  On 14 January 2014 he filed a request to the Bulgarian Constitutional Court for the annulment of the legal provisions, regulating the new state fee.

Thus, on 31 July 2014 the court issued its decision, proclaiming the fee as anti-constitutional.  In addition to the abovementioned inconsistencies of the legislative procedure, the court reasoned that the imposed new financial burden to some, but not all, renewable energy producers (i.e. wind and solar) breached the constitutional principle of equal treatment of investors under similar conditions.  The other constitutional principle, which was disregarded by the Parliament, was the principle of protection of investments.

According to the decision, the creation of a special differentiated legal regime for certain business entities and the exclusion of other similar entities from it is unacceptable for a jurisdiction governed by the rule of law.  On the contrary, the legislator must establish an appropriate legal mechanism that can successfully prevent unfair competition.  Further, the court reasons that the investment protection regulation shall be aimed against restrictions for investments and free economic activities, imposed by the state.  Since the legislator is obliged to encourage investments, it must simultaneously create a regime that protects legitimate investments already made so that the economic system can function normally.

The court decision does not have retroactive effect, i.e. the fees collected by July 2014 will not be reimbursed to the producers.