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Operation of Energy Laws in Time
The effects of a law shall apply to the relations arising prior to its entry into force only in instances specifically provided by law.
At its core energy legislation is a civil legislation, whereby it is ruled by civil principles.
In accordance with para. 1, Art. 4 Acts of civil legislation do not have retroactive effect and shall be applied to relations arising after their entry into force. The effects of a law shall apply to the relations arising prior to its entry into force only in instances specifically provided by law.
Some authors when interpreting this provision of the law draw attention to the fact that solely provisions of law may have retroactive effect and solely in instances specifically provided by it [1]. Such a narrow interpretation of the term Law shall be considered correct, especially as retroactive effect is an exception to the general principle of regulation.
Nevertheless even such seemingly apparent things have to be proved and defended.
The Federal Law On Introduction of Amendments to Certain Legislative Acts of the Russian Federation in Connection to the Accomplishment of Measures for Reforming of Unified Energy System of Russia No 250-FZ, dated November 4, 2007 became a critical stage in regulation of never-ending process of energy reforming.
Although the general effect of passing this law was rather positive, the law put under question the principle being discussed herein. Being more specifically, the law introduced a provision according to which either a Government Order or any other act within the certain scope of regulation may have retroactive effect.
Pursuant to the act specified herein, para. 13 of the Art. 6 of the Federal Law On Particularities of Operation of Electric Power Industry during Transition Period and Introduction of Amendments to Certain Legislative Acts of the Russian Federation and Annulment of Certain Legislative Acts of the Russian Federation in Connection to Adoption of the Federal Law On Electric Power Industry was amended as follows:
"The fundamental provision for operation of retail electricity markets approved by the Government of the Russian Federation and other normative documents regulating operation (pricing) of wholesale and retail markets are obligatory for the parties to public contract upon the date of these documents enter into force; they apply also to the relations arising from prior contracts except as the normative documents specified herein provide other date of their entry into force".
The Supreme Arbitrazh Court, an electric power justice flagship interpreted this provision in several cases; however in none of the cases it questioned the validity of such provision.
Initially the SAC of the RF confined itself to holding that The fundamental provision for operation of retail electricity markets shall not be equated to existing the Rules for operation of retail electricity markets for the period of reforming the electric power industry (approved by the Government Order No 530 from August 31, 2006) [2].
Thereafter the highest instance held that the Rules for operation of retail electricity markets for the period of reforming the electric power industry being an act regulating pricing on retail electricity market, has retroactive effect in so far as it relates to pricing. More specifically, it applies to the rights and obligations under the energy supply contracts arising upon the date of entry into force of the Federal Law On Introduction of Amendments to Certain Legislative Acts of the Russian Federation in Connection to the Accomplishment of Measures for Reforming of Unified Energy System of Russia [3].
Naturally, these two positions will affect the practice of contract regulation and guarantee supplier companies all over the country; more specifically, the consumer will be absolutely right resisting to change in the procedures for settlement under the contract (they can not be assumed as pricing matters) and other terms. And in its turn the consumer's will won't be taken into consideration when changing of the procedures for settlement on retail electricity market.
Nevertheless, on principle the SAC of the RF passes by the crucial question; even more, by his rulings it gives to understand that this issue is not in question.
In accordance with para. 2 of Art. 3 of the CC of the RF the rules of civil law contained in other laws must be consistent with this Code.
The rule of Article 6 of the Federal Law No 36-FS from March 26, 2003 On Particularities of Operation of Electric Power Industry during Transition Period and Introduction of Amendments to Certain Legislative Acts of the Russian Federation and Annulment of Certain Legislative Acts of the Russian Federation in Connection to Adoption of the Federal Law On Electric Power Industry which allows retroactive effect of either the Government Orders regulating retail markets or any other acts regulating pricing on retail electricity market is expressly inconsistent with Article 4 of the CC of the RF.
It would be reasonable to suppose that the SAC of the RF leaves this question open for the Constitutional Court. In essence, by giving this way carte blanche not only to the government but also to the other executive agencies the legislator violates not only the general maxim of operation of law in time [4] yet the constitutional principle of separation of powers.
Nevertheless, it is unclear why the priority of the CC is forgotten in electric power industry while in the other fields the SAC of the RF places a priority on on the CC of the RF relying upon Art. 3 of the Code [5] in case there is a conflict between the code and federal law.
Only in one case para. 4 of Art. 539 of the CC of the RF prioritize the other normative acts before the code, more specifically, to the extent of Paragraph 6 of Chapter 30 that is dealing with electric power supply contract but no further.
Herewith, the SAC of the RF attests to deviations from the general principles of the code in other energy disputes having been examined by the SAC of the RF. For instance, in one case the parties entered into a contract on a term that a normative legal act which will be approved by an agency much later applies to this contract. Simply stated, the parties by their agreement gave retroactive effect to the normative legal act. Proceeding from the provisions of the CC on invalidity of transactions such term of transaction should be deemed void in accordance with Art. 168 and 180 of the CC of the RF due to inconsistence of such term with Art. 4 of the CC of the RF. However, the SAC of the RF held that the conclusions of validity of such term made by inferior courts are well-founded [6]. And it is not the sole deviation in electric power energy from the general principle of operation of law in time...
Strictly speaking in conclusion it would be logic to ask a question – it it a new trend meaning departure from codification system to precedent that organize all the civil laws in other manner or just the electric power industry laws?
Former lawyer of INTELLECT Ivan Eleseev
[1] S. Grishaev, A. Erdelevskiy (Eds.). (2006). Commentary on the Civil Code of the Russian Federation, Part One. Retrieved from the Legal-Reference System Consultant Plus.
[2] Decision of the SAC of the RF. (December 12, 2008). No 13093/08. Retrieved from the Legal-Reference System Consultant Plus.
[3] Ruling of the Presidium of the SAC of the RF. (March 17, 2009). No 5642/08. Retrieved from the Legal-Reference System Consultant Plus.
[4] More specifically, in the Order No 1549-О-П from December 1, 2009 the Constitutional Court of the RF states: Furthermore, on numerous occasions the Constitutional Court of the Russian Federation pointed in its decisions that the general (fundamental) principle of operation of law in time is its application to relations arising after its entry into force, and the legislator solely is authorized to extend the application of new rules on facts and arising from them legal consequences arising prior to entry into force of the respective norms, i.e. to give retroactive effect to law. Retrieved from the Legal-Reference System Consultant Plus.
[5] Ruling of the SAC of the RF. (October 5, 2009). No ВАС-9548/09. Case No А73-7174/2008. Retrieved from the Legal-Reference System Consultant Plus.
[6] Ruling of the SAC of the RF. (September 16, 2009). No А60-15227/2008-С9. Retrieved from the Legal-Reference System Consultant Plus.
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