On 18 July 2014, the Austrian energy regulatory authority E-Control released its affirmative decision in relation to the certification of Trans Austria Gasleitung GmbH ("TAG") as a transmission system operator ("TSO") for gas. In its decision, E-Control not only requires TAG to be comprehensively restructured, but also takes a stance on the European Commission's ("EC") opinion on the potential non-compliance of the Austrian Natural Gas Act 2011 (Gaswirtschaftsgesetz "GWG") with EU unbundling rules.
In November 2013, TAG filed a request for TSO certification in accordance with the Independent Transmission Operator ("ITO") model. In accordance with Article 10 Para 6 of the EU Gas Directive 2009/73/EC ("Gas Directive"), E-Control, which is in charge of the TSO certification proceedings in Austria, notified a (positive) draft decision on the certification to the EC. In its subsequent opinion,1 the EC confirmed the restructuring requirements of TAG, but also doubted whether the GWG is in conformity with the Gas Directive with regard to provisions on the independence of management board and supervisory board members. On 18 July 2014, E-Control delivered an affirmative decision certificating TAG as TSO on the resolutive condition that TAG undertakes comprehensive restructuring. TAG's restructuring plan inter alia provides for the transfer of the legal ownership of the "Trans Alpine Gasleitung" gas pipeline from the minority shareholder Gas Connect Austria ("GCA") to TAG. The plan further includes the transfer of personnel in order to enable TAG to execute the core tasks of a gas TSO. Against this background, an increase of GCA's equity interest in TAG is likely to be executed in the near future. The decision issued by E-Control also takes a position on the potential non-compliance of the GWG with the Gas Directive.
- Potential Non-Compliance of the GWG with the Gas Directive
2.1. Independence Requirements for the Managing Board
In its opinion issued on 16 June 2014, the EC addresses the provision of Section 114 Para 2 GWG regulating the independence of the ITO's management. That statutory provision requires that the members of the ITO's management must be independent and must have had no professional position or responsibility, interest, or business relationship with the vertically integrated gas undertaking, any part of the vertically integrated gas undertaking, or any of its controlling shareholders other than the ITO for three years prior to their appointment ("cooling-off period"). Pursuant to the provision cited above, the cooling-off period does not apply to those members of the ITO's managing board who were appointed prior to the cut-off date of 3 March 2012.2 The EC takes the view that restricting the application of the independence requirements to appointments made after 3 March 2012 appears inconsistent with the Gas Directive and prevents E-Control from assessing whether the conditions are indeed fulfilled. The Commission therefore invited E-Control to assess the independence of the managing board members according to the independence requirements as set out in Section 114 GWG. The EC had already put the same concerns forward in connection with three prior Austrian applications for certification as ITO (ie Gas Connect Austria GmbH3, Baumgarten-Oberkappel Gasleitungs GmbH4, and Austrian Power Grid GmbH5 for the electricity sector). As a consequence, in all (positive) certification procedures, E-Control individually examined the independence of the designated members of the ITOs' managing boards on a case-by-case base. For the practical construction of Section 114 GWG, this approach means that despite the transitional period, also those managers appointed prior to 3 March 2012 have to (factually) comply with the independence requirements.
2.2. Independence Requirements for the Supervisory Board
In its opinion of 16 June 2014, the EC also addresses Section 115 GWG, which provides for independence requirements for members of an ITO's supervisory board.Such supervisory board members are appointed by the ITO's shareholders and represent the shareholders' interests (primarily including the interests of the vertically integrated undertaking).In order to guarantee some independence on the part of the supervisory board, the independence requirements as laid down in Section 114 Para 2 GWG (ie cooling-off period, financial and professional independence) also apply to half of the members of the supervisory board minus one ("Minority Members").In an Austrian-specific approach, Section 115 Para 2 GWG foresees that the employee representatives of a supervisory board are considered per legem as independent members of that board, even if they are, for example, at the same time employee representatives of the TSO's parent company. The Gas Directive does not explicitly mention such a per legem assumption.The EC takes the view that this Austrian provision appears to be inconsistent with Art 20 Para 3 Gas Directive. Accordingly, the EC again invited E-Control to assess the independence of supervisory board members in view of the independence requirements of Section 114 GWG.However, given the conception and functions of employee representatives as laid down in Section 89 et sequ of the Austrian Labour Constitution Act (Arbeitsverfassungsgesetz "ArbVG"), the EC's concerns seem to be unfounded:According to these provisions, employee representatives are obliged to represent the employee's interests and are granted certain rights to defend and protect these interests (right to supervise, intervene, informational rights with regard to the shareholders, etc). In executing their tasks, the employee representatives shall be independent from the interests of the shareholders and investors. The conception of the employee-representatives finds its functional equivalent in the per legem assumption of Section 115 Para 2 GWG. Therefore, the ArbVG secures the independence of the employee representatives from shareholder and investor interests.Also, E-Control rules on a consistent base that the per legem assumption is rectified by the position of the employee representative as set out in Sections 89 et sequ ArbVG. Consequently, E-Control has regularly not followed the EC's invitation to execute an individual independence assessment.6
From the preceding decisions, it may be inferred that E-Control will follow the same approach with regard to future ITO certifications. Therefore, it seems unlikely that E-Control will share the EC's concerns and will instead most likely choose not to scrutinize the independence of the employee-representatives on a case-by-case base.