To obtain Green Tariff, electricity generation facilities in Ukraine must comply with the local content rule. At the same time, as we repeatedly noted before, this requirement is contrary to a number of international agreements in the field of energy, including the Energy Charter. It is also contrary to the competition rules laid down by the World Trade Organization as well as to the non-discriminatory principle of the Treaty establishing the Energy Community (hereinafter, the Treaty).
In this regard, on October 2, 2014 Energy Community Secretariat appealed to Ukraine with an open letter which expressed its preliminary findings that the local content clause of the Ukrainian Law “On Electric Power Industry”12 is contrary to Directive 2009/28/ЕС13 on renewable energy as well as to Article 7 of the Treaty stipulating that “Any discrimination within the scope of this Treaty shall be prohibited.”
According to the Dispute Settlement Procedure under the Treaty approved by the Ministerial Council of the Energy Community on June 27, 2008 (hereinafter, the Rules), by its actions the Energy Community has initiated preliminary proceedings. Now Ukraine has 2 months to state its position on its alleged breach of the Treaty and to submit its comments.
It should be noted that the course of further proceedings will depend on Ukraine. Thus, according to the Rules, the Secretariat may, at any time during the preliminary proceedings (which it has already initiated against Ukraine), decide on their suspension or termination, particularly if Ukraine ceases its non- compliance with the laws of the Energy Community or makes clear commitments in respect of its intention to amended its legislation.
At the same time, if after the proceedings the Energy Community concludes that the violation of the Treaty on the part of Ukraine was lengthy and serious, it may apply the following sanctions under Article 92 of the Treaty: suspend the right to vote, the right to attend the meeting, or the right to use the mechanisms provided by the Treaty.
There is an opinion that the possible sanctions on the part of the Energy Community are not sever enough to have an impact on the offender. However, it should be clear that Ukraine’s further actions will demonstrate whether it values its reputation among the European countries, and whether its integration into the European energy space is seen as a priority. This issue is particularly relevant against the background of Ukraine’s energy space is seen as a priority. This issue is particularly relevant again urgent need to diversify gas supplies and increase its energy independence.