CJEU ruling on exclusive licences for mineral water springs, weighing in on an EU-Romanian legal conundrum

On 21 September 2023, the Court of Justice of the EU (CJEU) ruled on an issue regarding Romanian policies on the exploitation of its mineral water springs, and clarified a matter that stands at the intersection of EUR competition law (Article 106 (1) TFEU and Article 102 TFEW) and the national policy making of an EU member state. The decision, which opposed providing the holder of an exclusive licence for exploiting mineral water the opportunity to renew every five years without a competitive process, underlies the complexities of reconciling national interests with broader EU mandates. 

Preliminaries

Romania's controversial policy permits an entity holding an exclusive licence to exploit mineral water springs to renew its privilege every five years without being subjected to a competitive bidding process. The premise raised immediate questions about the policy's alignment with foundational EU competition principles.

In 1999, the Romanian government, through the National Agency for Mineral Resources (ANRM), granted a 20-year concession to the National Company Responsible for Mineral Waters (SNAM) for the exploitation of all the mineral water resources in Romania.

Nearing the end of the concession period, the Romaqua Group requested a public tender in 2018 when the original concession agreement came to an end and that the concession agreement not be automatically extended by another five years.

The ANRM refused these requests stating that a public tender could only be organised if SNAM did not request an extension of the concession agreement. The Romaqua Group lodged an appeal before the Court of Appeal in Bucharest, which dismissed the action. The Romaqua Group decided to pursue further legal action and brought an appeal before the High Court of Cassation and Justice of Romanian, which referred two preliminary questions to the CJEU.

Preliminary questions

In this context, the High Court of Cassation and Justice submitted the following questions to the CJEU:

1. Is Article 106(1) TFEU to be interpreted as precluding provisions of national legislation, such as those at issue in the main proceedings, which maintain the direct, original and non-competitive award, to a company whose capital is wholly owned by the state, of licences for the exploitation of mineral water springs by means of successive and unlimited extensions of exclusive licences (available to the state-owned company)?
2. Are Article 16 of the [Charter], Articles 49 and 119 TFEU, and Article 3 of Directive [2009/54] to be interpreted as precluding provisions of national legislation, such as those at issue in the main proceedings and mentioned above, which introduce an unjustified restriction on the freedom to conduct a business, including the freedom of establishment?

1. First preliminary question: exclusive licence for exploitation of mineral water springs

Unpacking Articles 106(1) and 102 TFEU:

Article 106(1) TFEU requires EU Member States, in the case of public undertakings and undertakings to which Member States grant special or exclusive rights, not to enact or maintain in force any measure contrary to the rules contained in the treaties, inter alia the rule provided for in Article 102 TFEU, which prohibits abuses of dominance.

In this case, the main question was whether, according to Articles 106(1) and 102 TFEU of EU law, national legislation can allow an entity with an exclusive licence to exploit mineral water springs to extend its licence every five years without undergoing a competitive process.

The key takeaways of the judgment of 21 September 2023 are:

1. Article 106(1) and Article 102 TFEU: The Romanian legislation in question is only problematic under these articles if it falls within their purview.
2. Special or Exclusive Rights: Any State measure granting exclusive protection to a limited number of enterprises may be considered the granting special rights. Since the Romanian national law gives certain enterprises sole rights to exploit mineral water springs in Romania, it falls within the scope of Article 106(1) TFEU.
3. Conditions under Article 102 TFEU: This article prohibits abuse of a dominant position. Three cumulative conditions must be met for it to apply:
   • Dominant Position: An entity can dominate the market when granted exclusive rights, allowing it to dictate who accesses the market. However, these rights do not automatically mean there is a dominant position as it is first necessary to define the product and geographic market concerned.
   • Abuse of Position: A dominant entity should not use means that could remove equally competent competitors from the market, other than ones based on merits. A Member State breaches the provisions of Article 106(1) and Article 102 TFEU if it enacts laws that either lead an entity to abuse its dominant position or could potentially lead to such abuse.
   • Effect on Trade Between Member States: The abuse of dominance must affect or threaten to affect trade between Member States.

Conclusion on the first question

The CJEU held on the first question that Articles 106(1) and 102 TFEU must be interpreted as opposing a national law that provides the holder of an exclusive licence for exploiting mineral water springs the chance to renew its licence every five years without a competitive process. This is especially true if that law makes the licence holder abuse its dominant position in a significant portion of the internal market. The referring court must assess the actual and potential effects of the legislation based on available facts and legal matters.

2. Second preliminary question: interpretation of various articles

Investigating further EU legal provisions:

The referring court wants to know if the following dispositions of EU law oppose the Romanian national legislation in question:

• Article 16 of the Charter (freedom to conduct a business);
• Article 49 TFEU (freedom of establishment);
• Article 119 TFEU (principle of open market economy with free competition);
• and Article 3 of Directive 2009/54 (exploitation of water springs).

Key takeaways:

1. Requirement for Admissibility: According to article 94(c) of the Rules of Procedure of the Court of Justice, the request for a preliminary ruling should explain why the referring court needs clarity on certain EU provisions and how these relate to the national laws in the main proceedings. If this isn't provided, the request is inadmissible.
2. Article 16 of the Charter: The referring court didn't provide reasons for referencing article 16 of the Charter, which guarantees the freedom to conduct a business. Thus, the question's reference to this article is inadmissible.
3. Article 49 TFEU: The referring court cited article 49 TFEU without clarifying its relevance to the main case. Furthermore, the freedom of establishment in the FEU Treaty does not apply if all aspects of a situation are within one Member State. Since the main case involves two Romanian companies dealing with mineral water springs in Romania and lacks a cross-border element, linking it to article 49 TFEU isn't justified. Thus, the second question's reference to article 49 TFEU is inadmissible.
4. Article 119 TFEU and article 3 of Directive 2009/54: The referring court didn't specify why it sought interpretations of article 119 TFEU and article 3 of Directive 2009/54. Furthermore, the latter doesn't provide rules on the granting of licences for mineral water exploitation by national authorities. Due to this lack of clarity, the second question's references to these provisions are also inadmissible.

Conclusion on the second question: The second question for a preliminary ruling is entirely inadmissible due to the above reasons.

Take aways

In essence, the referring court is inquiring about the implications and interpretations of various EU provisions in relation to Romanian legislation concerning the exclusive rights to exploit mineral water springs. While the first question revolves around the potential abuse of dominance, the second question faces admissibility issues due to unclear and unjustified references to specific EU provisions. In the past, there have been similar judgments. However, such judgments are rare and it has been some time since the last judgment where a Member State has been targeted by competition law instead of an undertaking.

The CJEU concludes that read together, Articles 106(1) and 102 TFEU suggest that national laws, which allow an exclusive license holder for mineral water springs to continuously renew its license every five years without a competitive process might be problematic. In this situation, the problem is that the law could cause the licence holder to misuse its dominant market position or create conditions where such misuse is likely.