Dutch Court Says Unbundling Conflicts with EU Law
Deal Announcement
22 June 2010
Amsterdam, 22 June 2010 - The Hague Court of Appeal vacated the judgment of The Hague District Court in a case that Eneco and other utility companies instituted against the State of the Netherlands regarding the implementation of an “unbundling mandate.” Global law firm Baker & McKenzie represented Eneco in the case.
The unbundling mandate – also referred to as the demerger law – entered into effect in July 2007 as part of the Independent Grid Management Act that was enacted at the end of 2006. The unbundling mandate requires that, by 1 January 2011, all integrated utility companies undergo demergers dividing them into two separate businesses: a grid management group and another group that handles production, transactions and supplies.
“The mandatory demergers may cause utility companies to suffer disproportional losses, as well as to incur disproportional expenses and risks,” said Frank Kroes, a partner at Baker & McKenzie. “This is why we instituted legal proceedings against the State of the Netherlands at Eneco’s behest in September 2007. We are delighted that the judgment of The Hague District Court has been vacated. In its decision, the Court of Appeal validated our objections to the unbundling mandate. We were convinced from the outset that the unbundling mandate contravened European law. The Court of Appeal adopted our objections almost verbatim in its decision.”
Fred de Hosson, also a partner at Baker & McKenzie, further explains: “In addition to the substantial financial consequences this decision will have for utility companies, it will also have significant consequences for the State of the Netherlands. The statutory provisions regarding the unbundling mandate may have been voided, but it is up to the government to determine whether Dutch law will be amended.”