The Italian Council of State confirmed that the automatic extension of service concessions for the distribution of natural under Legislative Decree 1
By a recent judgment, case no. 5984/2010, Enel Rete Gas Spa v Comune di Uboldo, consistently with its case law, the Council of State confirmed that under the transitory period in Legislative Decree 164/2000 the service concessions for the distribution of natural gas automatically extended. Legislative Decree 164/2000, which implement into Italian legal system the Gas Directive 2003/55/EC provided for a five-year transitional period starting from 31 December 2004. This period was aimed at enabling the parties to service concessions in force on the date of the enactment of Legislative Decree 164/2000 to comply with the new regime. The transitional period applied to service concessions for distribution of natural gas awarded before the Decree. This period automatically extended if the concession-holder met certain dimensional thresholds before 31 December 2004.
In the Rete Gas Spa v Comune di Uboldo case, the appealed, Municipality of Uboldo (the Municipality), had awarded the appellant, Enel Rete Gas Spa (ERG) a concession for the provision of public gas distribution services in 1965. The concession was originally due to expire in 2015. The regime for the transitory period was then amended by the Act 239/2004 (the Marzano Act). Such piece of legislation postponed by two years the starting of the transitional period. Relying on Article 15(5) of Legislative Decree 164/2000, in July 2004 the Municipality declared the early termination of the concession service awarded to ERG in December 2005.
Unsurprisingly, ERG challenged the determination of the Municipality before the Regional Administrative Tribunal for Lombardy. It argued that, in light of the Marzano Act 239/2004, the service concession had to be kept in place at least until December 2007. The Tribunal, however, dismissed the ERG’s argument and upheld the challenged determination of the Municipality. Therefore, ERG appealed to the Council of State.
The Council of State confirmed that the extension of the transitory period in Article 15(5) of Legislative Decree 164/2000 had an automatic nature. More precisely, the extension was triggered by the concessionaire meeting the statutory dimensional thresholds. As a result, no decision of the contracting authority was necessary to extend the duration of service concessions. On the contrary, the contracting authority had to adopt a specific decision if it wanted to disapply the automatic extension mechanism. In this case, however, the authority was required to indicate the reasons why it deemed it necessary the immediate termination of the concession. As explained by the Council of State, the rationale for this mechanism was to protect the investments made by the concessionaire-holders. To this aim, Article 15(5) of Legislative Decree 164/2000 conferred on them the right to exploit the concession for a reasonable period of time to recoup the investments and which was not so long to delay the liberalization of gas industry. The legitimate expectations of concessionaire deriving from Article 15 would be frustrated if a contracting authority could disapply the automatic extension mechanism at its will. According to the Council of State this is the case with the early termination of the ERG service concession decided by the Municipality. Indeed, the Municipality had not provide any reason to terminate the ERG concession. Therefore, the Council of State found the Municipality decision to be unlawful as it had misinterpreted Article 15(5) of Legislative Decree 164/2000. In fact, the Municipality erred because it had disregarded the automatic nature of the extension mechanism. Thus, the Council of State allowed the appeal and set aside the decision of the Municipality.
In the Rete Gas Spa v Comune di Uboldo case, the appealed, Municipality of Uboldo (the Municipality), had awarded the appellant, Enel Rete Gas Spa (ERG) a concession for the provision of public gas distribution services in 1965. The concession was originally due to expire in 2015. The regime for the transitory period was then amended by the Act 239/2004 (the Marzano Act). Such piece of legislation postponed by two years the starting of the transitional period. Relying on Article 15(5) of Legislative Decree 164/2000, in July 2004 the Municipality declared the early termination of the concession service awarded to ERG in December 2005.
Unsurprisingly, ERG challenged the determination of the Municipality before the Regional Administrative Tribunal for Lombardy. It argued that, in light of the Marzano Act 239/2004, the service concession had to be kept in place at least until December 2007. The Tribunal, however, dismissed the ERG’s argument and upheld the challenged determination of the Municipality. Therefore, ERG appealed to the Council of State.
The Council of State confirmed that the extension of the transitory period in Article 15(5) of Legislative Decree 164/2000 had an automatic nature. More precisely, the extension was triggered by the concessionaire meeting the statutory dimensional thresholds. As a result, no decision of the contracting authority was necessary to extend the duration of service concessions. On the contrary, the contracting authority had to adopt a specific decision if it wanted to disapply the automatic extension mechanism. In this case, however, the authority was required to indicate the reasons why it deemed it necessary the immediate termination of the concession. As explained by the Council of State, the rationale for this mechanism was to protect the investments made by the concessionaire-holders. To this aim, Article 15(5) of Legislative Decree 164/2000 conferred on them the right to exploit the concession for a reasonable period of time to recoup the investments and which was not so long to delay the liberalization of gas industry. The legitimate expectations of concessionaire deriving from Article 15 would be frustrated if a contracting authority could disapply the automatic extension mechanism at its will. According to the Council of State this is the case with the early termination of the ERG service concession decided by the Municipality. Indeed, the Municipality had not provide any reason to terminate the ERG concession. Therefore, the Council of State found the Municipality decision to be unlawful as it had misinterpreted Article 15(5) of Legislative Decree 164/2000. In fact, the Municipality erred because it had disregarded the automatic nature of the extension mechanism. Thus, the Council of State allowed the appeal and set aside the decision of the Municipality.
Comments