Rule challenge by Nord Stream 2 pipeline operator gets second wind

LUXEMBOURG (CN) — The European Court of Justice on Tuesday revived a challenge of environmental regulations from the owners of the beleaguered Nord Stream 2 gas pipeline.

Completed in 2021 but never becoming operational, the Nord Stream 2 would have transported 1.9 trillion cubic feet of natural gas annually from Russia to Germany under the Baltic Sea, doubling the inflow of gas from Russia. After the Russian invasion of Ukraine in February, German authorities revoked its operations certificate, effectively killing the project.

But even before the war, the pipeline faced critics on multiple fronts. U.S. authorities threatened sanctions over the project back in 2019, causing a number of American companies to back out of constructing it. The case given new life Tuesday in Luxembourg meanwhile stems from regulations that the EU passed in 2019 out of concern that Moscow’s control of EU energy was already too strong.

Expanding regulations covering natural-gas infrastructure to include pipelines transporting gas to and from the bloc, the new rules said such pipelines had to be owned and operated by separate companies.

A Swiss subsidiary of Gazprom, an entity controlled by the Russian state that owns the Nord Stream 2, filed suit, but the General Court of the EU rejected the case as inadmissible. The 2020 decision rested on the court's conclusion that Gazprom's subsidiary could not claim direct impact from the legislative changes.

Reversing that finding Tuesday, the Court of Justice echoed recommendations from an advocate general last year.

“The appellant was in many ways in a unique position vis-à-vis the contested measure,” Advocate General Michal Bobek had said in the 2021 nonbinding opinion.

In fact, the new regulations were widely seen as focusing on Nord Stream 2 specifically.

“The General Court wrongly held that the appellant was not directly concerned by the directive at issue,” the Grand Chamber wrote this morning.

The decision came down a day after Gazprom shut down the 11-year-old Nord Stream 1 pipeline, ostensibly for maintenance but there is suspicion that Moscow is using gas to pressure EU countries, particularly Germany, to soften their stance on the war in Ukraine. In June, Gazprom reduced the flow of gas in the pipeline by 60%. About 40% of the EU’s natural gas comes from Russia, and nearly half of that travels via Nord Stream 1.

The case will now return to the General Court to rule on the substance of the case.

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