Essent Belgium NV v. [Flemish region of] Vlaams Gewest

A Belgian gas and electricity supplier, Essent Belgium NV, sought compensation from Vlaams Gewest, a Flemish region of Belgium, where a series of legislative changes had excluded the supplier from a scheme designed to benefit Flemish sources of renewable electricity. The scheme relieved electricity end-users of having to pay for distribution system costs—as much as 37% of regional electric bills—when purchasing electricity from qualifying sources, and so made those sources’ product more attractive and more heavily subscribed. The first version of the scheme extended this benefit only to renewable suppliers that were connected directly to the region’s distribution grid; the second, revised version made the benefit available to suppliers located within all of Belgium, even if they were linked to the Flemish region’s distribution grid via a high-voltage transmission line. Essent Belgium sources its renewable electricity from facilities located primarily in the Netherlands. In support of the claims for compensation it made in a Dutch court, Essent Belgium raised arguments that the scheme violated EU prohibitions on discrimination against goods and services based on their location within or outside of national borders. Rather than resolve those arguments over EU law, the Dutch court referred to the European Court of Justice the preliminary question of whether the scheme’s discriminatory aspect was permissible. The relevant standard roots in the Principle of Proportionality: if a scheme that has discriminatory effects serves legitimate policy goals effectively and with precision, then it may be permissible because its degree of discrimination is proportionate to its positive outcomes. Though EU policy encourages the development and use of renewable energy, the court noted that this scheme benefited multiple parties—not only renewable energy facilities—and that the amount of benefit flowing to one party or another would vary with market conditions. On this basis, the court, rejecting the opinion offered by the Advocate General, concluded that the scheme’s operation was “too indirect, uncertain, and risky” to meet the proportionality standard.