Parties Grounds Operative part

In Case C‑413/04,

ACTION for annulment under Article 230 EC, brought on 23 September 2004,

European Parliament, represented by A. Baas and U. Rösslein, acting as Agents, with an address for service in Luxembourg,

applicant,

supported by

Commission of the European Communities, represented by J. Sack and P. Van Nuffel, acting as Agents, with an address for service in Luxembourg,

intervener,

v

Council of the European Union, represented by A. Lopes Sabino and M. Bishop, acting as Agents,

defendant,

supported by

Republic of Estonia, represented by L. Uibo, acting as Agent,

Republic of Poland, represented by M. Węglarz, T. Nowakowski and T. Krawczyk, acting as Agents,

interveners,

THE COURT (Grand Chamber),

composed of V. Skouris, President, C.W.A. Timmermans, A. Rosas, K. Lenaerts, R. Schintgen, P. Kūris and E. Juhász, Presidents of Chambers, K. Schiemann (Rapporteur), J. Makarczyk, G. Arestis, A. Borg Barthet, A. Ó Caoimh and L. Bay Larsen, Judges,

Advocate General: L.A. Geelhoed,

Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 15 March 2006,

after hearing the Opinion of the Advocate General at the sitting on 1 June 2006,

gives the following

Judgment

1. By its action, the European Parliament seeks the annulment of Council Directive 2004/85/EC of 28 June 2004 amending Directive 2003/54/EC of the European Parliament and of the Council as regards the application of certain provisions to Estonia (OJ 2004 L 236, p. 10, hereinafter ‘the contested directive’).

2. Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) entered into force on 19 February 1997. It was to be transposed into national law not later than 19 February 1999.

3. The Treaty concerning the accession to the European Union of 10 new Member States, including the Republic of Estonia, was signed on 16 April 2003 (OJ 2003 L 236, p. 17, hereinafter ‘the 2003 Treaty of Accession’). As provided by Article 1(2) of that Treaty, the conditions of that admission and the adjustments to the Treaties on which the European Union is founded, entailed by such admission, are set out in the Act annexed to that Treaty and form an integral part of it (hereinafter ‘the 2003 Act of Accession’).

4. Annex VI to the 2003 Act of Accession provides for transitional measures in favour of the Republic of Estonia inter alia as regards the application of Directive 96/92.

5. Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92 (OJ 2003 L 176, p. 37) was adopted on the basis of Articles 47(2) EC, 55 EC and 95 EC.

6. For the purposes of delaying, on a temporary basis, the application of certain provisions of Directive 2003/54 as regards the Republic of Estonia, the Council of the European Union adopted the contested directive. It was adopted on the basis of Article 57 of the 2003 Treaty of Accession.

7. In support of its action, the European Parliament submits, first, that the contested directive could not validly be adopted on the basis of the said Article 57 and, second, that it does not comply with the duty to state reasons laid down in Article 253 EC.

8. By orders of the President of the Court of 21 December 2004 and 9 March 2005, the Commission of the European Communities, the Republic of Estonia and the Republic of Poland were given leave to intervene in these proceedings, the Commission in support of the Parliament and the two Member States in support of the Council.

Legal background

The 2003 Treaty of Accession

9. Article 2(2) and (3) of the 2003 Treaty of Accession provides:

‘2. This Treaty shall enter into force on 1 May 2004 … .

3. Notwithstanding paragraph 2, the institutions of the Union may adopt before accession the measures referred to in Articles 6(2) second subparagraph, 6(6) second subparagraph, … 38, 39, 41, 42 and 55 to 57 of the Act of Accession, Annexes III to XIV to that Act … . These measures shall enter into force only subject to and on the date of the entry into force of this Treaty.’

10. Article 20 of the 2003 Act of Accession provides:

‘The Acts listed in Annex II to this Act shall be adapted as specified in that Annex.’

11. Article 21 of the 2003 Act of Accession reads:

‘The adaptations to the acts listed in Annex III to this Act made necessary by accession shall be drawn up in conformity with the guidelines set out in that Annex and in accordance with the procedure and under the conditions laid down in Article 57.’

12. Article 24 of the 2003 Act of Accession provides:

‘The measures listed in Annexes V, VI, VII, VIII, IX, X, XI, XII, XIII and XIV to this Act shall apply in respect of the new Member States under the conditions laid down in those Annexes.’

13. Article 55 of the 2003 Act of Accession provides:

‘At the duly substantiated request of one of the new Member States, the Council, acting unanimously on a proposal from the Commission, may, before 1 May 2004, take measures consisting of temporary derogations from acts of the institutions adopted between 1 November 2002 and the date of signature of the Treaty of Accession.’

14. Article 57 of the 2003 Act of Accession states:

‘1. Where acts of the institutions prior to accession require adaptation by reason of accession, and the necessary adaptations have not been provided for in this Act or its Annexes, those adaptations shall be made in accordance with the procedure laid down by paragraph 2. Those adaptations shall enter into force as from accession.

2. The Council, acting by a qualified majority on a proposal from the Commission, or the Commission, according to which of these two institutions adopted the original acts, shall to this end draw up the necessary texts.’

15. It must be pointed out directly that although the French version of Article 57 suggests that adaptations thereunder must be made prior to accession – ‘avant l’adhésion’ – that temporal restriction is not in fact, as is clear from the other language versions of that provision, placed on recourse to Article 57 but on the date of the acts to be amended (see, to that effect, in respect of the identical provision in the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, hereinafter ‘the 1994 Act of Accession’), Case C‑259/95 Parliament v Council [1997] ECR I‑5303, paragraphs 12 to 22).

16. Annex VI to the 2003 Act of Accession contains a provision that:

‘In Estonia, Article 19(2) of Directive 96/92/EC shall not apply until 31 December 2008.’

17. Annexed to the final act of the 2003 Treaty of Accession, Joint Declaration No 8 of the 15 Member States entitled ‘Declaration on oil shale, the internal electricity market and Directive 96/92/EC … (Electricity Directive): Estonia’ (hereinafter ‘Declaration No 8’) states:

‘The Union will closely monitor that Estonia fulfils its commitments notably with regard to the further preparation to the internal energy market (oil shale sector restructuring, electricity sector restructuring, legislation, strengthening Energy Market Inspectorate, etc.).

The Union draws Estonia’s attention to the conclusions of the Lisbon and Barcelona European Councils, related to accelerated market opening in – among others – the electricity and gas sectors, with the aim of achieving a fully operational internal market in these areas, and notes Estonia’s earlier statements made in this regard on 27 May 2002 in the context of the accession negotiations. Notwithstanding the need for the early implementation of an operational internal electricity market, the Union takes note that Estonia reserves its position regarding future legislative developments in this area. The Union recognises in this respect the specific situation related to the restructuring of the oil shale sector which will require particular efforts until the end of 2012, and the need for gradual opening of the Estonian electricity market for non‑household customers until that date.

The Union notes that, with a view to limiting the potential distortion of competition in the internal electricity market, safeguard mechanisms, such as the reciprocity clause of Directive 96/92/EC, may have to be applied.

The Commission will closely monitor the development of the electricity production and the possible changes in the electricity market in Estonia and in the neighbouring countries.

Without prejudice to the above, any Member State may from 2009 onwards request the Commission to assess the development of the electricity markets of the Baltic Sea areas. Based on this assessment, with full consideration to the unique character of oil shale and social and economic considerations related to the extraction, production and consumption of oil shale in Estonia, and taking into account the objectives of the Community regarding the electricity market, the Commission shall report to the Council with appropriate recommendations.’

Secondary legislation

18. Article 19 of Directive 96/92 provided:

‘1. Member States shall take the necessary measures to ensure an opening of their electricity markets, so that contracts under the conditions stated in Articles 17 and 18 can be concluded at least up to a significant level, to be notified to the Commission on an annual basis.

The share of the national market shall be calculated on the basis of the Community share of electricity consumed by final consumers consuming more than 40 GWh per year (on a consumption site basis and including autoproduction).

The average Community share shall be calculated by the Commission on the basis of information regularly provided to it by Member States. The Commission shall publish this average Community share defining the degree of market opening in the Official Journal of the European Communities before November each year, with all appropriate information clarifying the calculation.

2. The share of the national market referred to in paragraph 1 will be increased progressively over a period of six years. This increase will be calculated by reducing the Community consumption threshold of 40 GWh, referred to in paragraph 1 from 40 GWh to a level of 20 GWh annual electricity consumption three years after the entry into force of this Directive and to a level of 9 GWh annual electricity consumption six years after the entry into force of this Directive.

3. Member States shall specify those customers inside their territory representing the shares as specified in paragraphs 1 and 2 which have the legal capacity to contract electricity in accordance with Articles 17 and 18, given that all final consumers consuming more than 100 GWh per year (on a consumption site basis and including autoproduction) must be included in the above category.

Distribution companies, if not already specified as eligible customers under this paragraph, shall have the legal capacity to contract under the conditions of Articles 17 and 18 for the volume of electricity being consumed by their customers designated as eligible within their distribution system, in order to supply those customers.

4. Member States shall publish by 31 January each year the criteria for the definition of eligible customers which are able to conclude contracts under the conditions of Articles 17 and 18. …’

19. Recital 33 in the preamble to Directive 2003/54 states that ‘[g]iven the scope of the amendments that are being made to Directive 96/92/EC, it is desirable, for reasons of clarity and rationalisation, that the provisions in question should be recast’.

20. The second paragraph of Article 29 of that directive provides in that regard that ‘Directive 96/92/EC shall be repealed from 1 July 2004 without prejudice to the obligations of Member States concerning the deadlines for transposition and application of the said Directive. References made to the repealed Directive shall be construed as being made to this Directive and should be read in accordance with the correlation table in Annex B’. According to that correlation table, Article 21 of Directive 2003/54 corresponds to Article 19 of Directive 96/92.

21. Article 21 of Directive 2003/54 is worded as follows:

‘Market opening and reciprocity

1. Member States shall ensure that the eligible customers are:

(a) until 1 July 2004, the eligible customers as specified in Article 19(1) to (3) of Directive 96/92/EC. Member States shall publish by 31 January each year the criteria for the definition of these eligible customers;

(b) from 1 July 2004, at the latest, all non-household customers;

(c) from 1 July 2007, all customers.

…’

22. Under Article 30(1) of that directive, Member States are to bring into force the laws, regulations and administrative provisions necessary to comply with the directive not later than 1 July 2004.

The contested directive

23. Referring to Article 57 of the 2003 Act of Accession, the Republic of Estonia, by letter of 17 September 2003, lodged with the Commission a request for the amendment of Directive 2003/54 to take account both of the derogation granted to that Member State by Annex VI of the 2003 Act of Accession as regards Article 19(2) of Directive 96/92 and of Declaration No 8.

24. On 27 April 2004, the Commission formulated a proposal for a directive aimed at delaying, on a transitional basis, the implementation of certain provisions of Directive 2003/54 as regards the Republic of Estonia (COM/2004/318 final). That proposal was based on Articles 47(2) EC, 55 EC and 95 EC.

25. Although ratifying that proposal, the terms of which it substantially reproduced, the contested directive was adopted by the Council, on 28 June 2004, on the basis of Article 57 of the 2003 Act of Accession. The Parliament was informed of that adoption by the Secretary General of the Council by a letter of 9 July 2004.

26. That letter stated that ‘[in view of] the link between the Treaty of Accession and [this] proposal … and in view of the need to adopt [this] measure in time, and in any event before 1 July 2004, … the date on which Directive 2003/54 is to be implemented, the Council decided to use Article 57 of the [2003 Act of Accession] as the legal basis …, a basis which does not require the participation of the European Parliament in the legislative process’.

27. Article 1 of the contested directive provides for the addition to Article 26 of Directive 2003/54 of a paragraph 3 worded as follows:

‘Estonia shall be granted a temporary derogation from the application of Article 21(1)(b) and (c) until 31 December 2012. Estonia shall take the measures necessary to ensure the opening of its electricity market. This shall be carried out gradually over the reference period with the aim of complete opening of the market by 1 January 2013. On 1 January 2009, the opening of the market must represent at least 35% of consumption. Estonia shall communicate annually to the Commission the consumption thresholds extending eligibility to final customers.’

28. Recitals 1 to 4, 7 and 8 in the preamble to the contested directive state:

‘(1) During the accession negotiations, Estonia invoked the specific characteristics of its electricity sector to request a transitional period for the application of Directive 96/92/EC … .

(2) In Annex VI of the [2003] Act of Accession, Estonia was granted a transitional period until 31 December 2008 for the application of Article 19(2) of Directive 96/92/EC, relating to the gradual opening of the market.

(3) Declaration No 8 … recognised moreover that the specific situation relating to the restructuring of the oil shale sector in Estonia was going to require particular efforts until the end of 2012.

(4) Directive 96/92/EC was replaced by Directive 2003/54/EC which has to be implemented by 1 July 2004 and which has the effect of speeding up the opening of the electricity market.

…

(7) Oil shale is the only real indigenous energy resource in Estonia and national production represents almost 84% of world production. 90% of the electricity produced in Estonia is from this solid fuel. It is therefore of great strategic importance for security of supply in Estonia.

(8) The granting of a further derogation for the period 2009 to 2012 will guarantee security of investments in generating plants and security of supply in Estonia while allowing the serious environmental problems created by those plants to be resolved.’

The action

29. The Parliament relies on two pleas in law in support of its action, alleging, first, that the legal basis of the contested directive is incorrect and, second, breach of the duty to state reasons.

The first plea in law

30. By its first plea in law, the Parliament submits that the contested directive, which introduces transitional derogations as regards the application of Directive 2003/54, could not validly be adopted on the basis of Article 57 of the 2003 Act of Accession and that it should have been adopted in accordance with the ordinary legislative procedure prescribed by the EC Treaty, namely, in this case, on the basis of Articles 47(2) EC, 55 EC and 95 EC which served as the legal basis for the adoption of Directive 2003/54. Article 57 in fact allows only adaptations intended to enable acts of the institutions to apply fully to the acceding States and not the grant of transitional derogations from them.

53. It must be noted, however, that the contested directive did not confine itself to such a measure. It granted the Republic of Estonia an additional transitional period, going beyond 31 December 2008 until the end of 2012, as regards the implementation of Article 21(1)(b) and (c) of Directive 2003/54, whilst providing, in that regard, that market opening should take place gradually, so as to attain 35% of the market on 1 January 2009 and a complete opening by the end of 2012, and by introducing, for that purpose, a requirement that the Republic of Estonia communicate annually to the Commission the consumption thresholds extending eligibility to final customers (hereinafter together, ‘the further derogations introduced by the contested directive’).

54. Such further derogations, could not, for their part, be granted on the basis of Article 57 of the 2003 Act of Accession.

55. Admittedly, it cannot be maintained, as the Parliament did, that such a grant derogates from the 2003 Act of Accession itself on the ground that the latter provided, for Estonia, only a transitional period expiring at the end of 2008.

56. It is quite clear, as the Estonian Government correctly pointed out, that the derogation contained in Annex VI to the 2003 Act of Accession occurs in a legislative context in which only a partial opening of the market was envisaged by Directive 96/92. It is with regard only to such partial opening that the date of 31 December 2008 was considered appropriate to take account of the requirements arising from the particular situation of the electricity sector of that new Member State, without thereby in any way prejudicing provisions which might need to be adopted in relation to those same requirements should that legislative context subsequently evolve, in particular, in the direction of complete opening of the market concerned.

57. It is true, furthermore, that the additional transitional period thus accorded to the Republic of Estonia by the contested directive is clearly, as the Estonian Government pointed out, on the same lines as Declaration No 8. That declaration refers to impending accelerated market opening in the electricity sector and recognises, in particular, in that perspective, the specific situation of that new Member State related to the restructuring of the oil shale sector which will require particular efforts until the end of 2012.

58. However, the fact remains that such a statement of position contained in a joint declaration of the Member States of the Union annexed to the final act of the 2003 Treaty of Accession cannot, contrary to the Estonian Government’s submission, be determinative of the legal basis to which recourse must be had for the grant of derogations such as the further derogations introduced by the contested directive.

59. It must be pointed out that those further derogations do not come within the meaning of ‘adaptation’ as the term is used in Article 57 of the 2003 Act of Accession and as defined in paragraphs 31 to 38 of this judgment.

60. The further derogations introduced by the contested directive constitute measures whose sole object and purpose, like most temporary derogations, is to postpone temporarily the effective application of the Community act concerned, and whose adoption therefore involves a political assessment. Unlike the derogation discussed in paragraphs 39 to 52 of this judgment which is, for its part, intended to integrate into the legislative framework specific to Directive 2003/54 the acquis constituted for the Republic of Estonia by the derogation provided for in Annex VI to the 2003 Act of Accession, those further derogations cannot be regarded as indispensable for the purposes of ensuring the full applicability of that directive as regards that new Member State.

61. It follows that the further derogations introduced by the contested directive could not validly be adopted on the basis of Article 57 of the 2003 Act of Accession.

63. Such derogations, which are intended to apply only subject to and on the date of actual entry into force of the 2003 Treaty of Accession, cannot, contrary to the Council’s submission, disregard either the second and third paragraphs of Article 249 EC and Article 299 EC, under which the acts adopted by the institutions apply to the Member States, or Article 2(2) and (3) of the 2003 Treaty of Accession.

64. First, such specific provisions, like, moreover, the acts in which they are included and/or from which they derogate, will apply to the acceding States only on the date on which their accession takes effect, when they acquire the status of Member States.

65. Second, the fact that Article 2(2) of the 2003 Treaty of Accession provides that the Treaty is not to enter into force until 1 May 2004 and that Article 2(3) provides that, notwithstanding that principle, certain provisions of that Treaty may be applied earlier does not affect the possibility of provision being made, in acts adopted not under that Treaty but on the basis of the EC Treaty itself, for the conditions under which such acts adopted between the signature of the Treaty of Accession and its entry into force will apply to the future Member States once accession has taken place.

69. The existence of those mechanisms specific to the accession process underway confirms therefore that it is, in principle, by means of the ordinary legislative procedure under the Treaty and not in the framework of the special procedure under Article 57 of the 2003 Act of Accession that the further derogations introduced by the contested directive should have been adopted.

70. Likewise, the Court cannot accept the Council’s argument concerning the urgent nature of the adoption of such further derogations on the basis of Article 57 prior to the date on which the provisions necessary to comply with Directive 2003/54 should have been implemented, rather than by following the legislative co‑decision procedure which takes much longer, in order to avoid creating legal uncertainty and adversely affecting the legitimate interests of operators on the Estonian electricity market.

71. First, as has been pointed out in paragraphs 66 to 68 of this judgment, when the Community envisaged the adoption of a legislative act during the period between signature of the 2003 Treaty of Accession and its entry into force, the information and consultation procedure could lead to the grant of possible transitional derogations in favour of an acceding State as regards application of the provisions of the act the adoption of which was so envisaged.

72. On that point, none of the parties has provided evidence to suggest that the information and consultation procedure was not properly followed and that the Estonian Government was not in a position to assert its interests as regards the proposal for a directive which led to the adoption of Directive 2003/54, as provided for by that procedure (see, by way of analogy, Halyvourgiki and Helleniki Halyvourgia v Commission , paragraph 15).

73. Second, and as the Parliament observed, once a Commission proposal is before it, the Council has, where appropriate, the opportunity to draw the Parliament’s attention to the possible urgency of adopting a particular measure. The co‑decision procedure under Article 251 EC in no way precludes a relatively rapid adoption of a legislative text, particularly if there are no significant differences of opinion between the Parliament and the Council.

74. As to the legal uncertainty which could arise from the lapse of time inherent in the ordinary legislative procedure, this could be remedied, as the Commission rightly maintained, only by giving possible retrospective effect to the requested transitional derogation should it be granted.

76. It is also appropriate to point out that it is of course possible, as the Polish Government in particular maintained, that the lack of a general provision in the 2003 Act of Accession enabling transitional derogations to be granted as regards the application to the new Member States of acts adopted between the date of signature of the 2003 Treaty of Accession and that of its entry into force and the mere existence, for such purposes, of the information and consultation procedure appear in retrospect to have been insufficient. It is also possible that that circumstance gave rise to the fact that Article 55 of the Act concerning the conditions of accession to the European Union of the Republic of Bulgaria and of Romania and the adjustments to the Treaties on which the European Union is founded (OJ 2005 L 157, p. 203), cited by various parties, the purpose of which is similar to that of Article 55 of the 2003 Act of Accession, provides expressly that the power of the Council to adopt temporary derogations extends also to acts of the institutions adopted between the date of signature of the treaty of accession and that of the accession itself. However, the possible imperfections which the 2003 Act of Accession harbours in that regard cannot authorise recourse to an incorrect legal basis.

77. It follows from all the foregoing that the further derogations introduced by the contested directive referred to in paragraph 53 of this judgment could not validly be adopted on the basis of Article 57 of the 2003 Act of Accession.

78. It follows that the first plea in law is well founded in claiming that those further derogations are unlawful.

The second plea in law

79. Since examination of the first plea in law resulted only in a finding that the contested directive was unlawful in part, the second plea in law alleging a defective statement of reasons for the said directive must be examined in order to ascertain whether the directive is not entirely vitiated by illegality on that second ground.

80. By that second plea in law, the Parliament claims that the contested directive does not explain whether, and to what extent, it is making an adaptation by reason of the accession, or the reasons for recourse to the exceptional legal basis constituted by Article 57 of the 2003 Act of Accession, which derogates from the normal legislative procedure. It states that the preamble to that directive was not, moreover, changed in relation to the preamble to the Commission’s proposal referred to in paragraph 24 of this judgment, whilst the latter was based on Articles 47(2) EC, 55 EC and 95 EC, and that no explanation was given for that difference.

81. In that regard, it has consistently been held that the statement of reasons required by Article 253 EC must be adapted to the nature of the act in question. Whilst that statement of reasons must show clearly and unequivocally the reasoning of the Community institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons for it and the competent court to exercise its power of review, the institution is not required to go into every relevant point of fact and law. The question as to whether the statement of reasons for a measure satisfies the requirements of Article 253 EC must be assessed with reference not only to the wording of the measure but also to its context and to the whole body of legal rules governing the matter in question (see, in particular, Case C-15/00 Commission v EIB [2003] ECR I‑7281, paragraph 174).

82. In this case, as the Council and the Estonian Government correctly submitted, the preamble to the contested directive, which refers to the Republic of Estonia’s request, to the transitional derogation relating to Directive 96/92 granted to that Member State by Annex VI to the 2003 Act of Accession, to Declaration No 8, to the accelerated opening of the electricity market brought about by Directive 2003/54, and, finally, to the specific features of the Estonian oil shale sector and the difficulties which that sector would encounter in the absence of the transitional measures provided for by the contested directive, is such as to enable those concerned to ascertain sufficiently the reasons for those transitional measures and the competent court to exercise its power of review.

83. In particular, those considerations enable the Court to review the validity of the legal basis used by the Community legislature without there being a need for more detailed reasons for that choice of legal basis, which was expressly identified in the citation in the preamble to the contested directive as being Article 57 of the 2003 Act of Accession. Nor does the fact that the Council did not adopt the legal basis proposed by the Commission call for a more specific statement of reasons in that regard.

84. In those circumstances, the second plea in law must be held not to be well founded.

The partial annulment of the contested directive

85. As follows from paragraphs 77 and 78 of this judgment, the Court partially upholds the first plea in law in so far as the further derogations introduced by the contested directive could not validly be adopted on the basis of Article 57 of the 2003 Act of Accession.

86. In that regard, it must be borne in mind that, in accordance with settled case-law, partial annulment of a Community act is possible only if the elements the annulment of which is sought may be severed from the remainder of the act (see, in particular, Case C-244/03 France v Parliament and Council [2005] ECR I-4021, paragraph 12, and the case‑law there cited).

87. In this case, the further derogations introduced by the contested directive are severable from the rest of that directive which, as is clear from Article 1 thereof, read in the light of recitals 2 and 8 in its preamble, pursues a twofold objective, namely, first, to take into account in the framework of the system laid down by Directive 2003/54 the transitional period previously granted to the Republic of Estonia by Annex VI to the 2003 Act of Accession in respect of Directive 96/92 and, second, the grant, for the period 2009 to 2012, of a further derogation accompanied by an obligation gradually to implement Article 21 of Directive 2003/54.

88. It follows that the contested directive must be annulled in so far as it grants Estonia a derogation from the application of Article 21(1)(b) and (c) of Directive 2003/54, going beyond 31 December 2008 and imposes a corresponding obligation to ensure only partial opening of the market representing 35% of consumption on 1 January 2009 and an obligation to communicate annually the consumption thresholds extending eligibility to final customers.

The temporal effects of the annulment

89. Citing the second paragraph of Article 231 EC and the need to avoid a situation of uncertainty for the economic operators and investors in the electricity sector in Estonia and for the workers concerned, the Council, supported to that effect by the Estonian Government and by the Commission, requested the Court, should it annul the contested directive, to maintain its effects until a new directive is adopted.

90. Stressing that its action does not concern the substantive justification for the Republic of Estonia’s request for a derogation, but solely the legal basis on which the contested directive was adopted, the Parliament indicated that it did not wish to express a view on the Council’s request.

91. In that regard, it is appropriate to note that the request was made in the light of the possibility that the Court would annul the contested directive in its entirety.

92. However, the contested directive is, in the event, only being partially annulled to the extent stated in paragraph 88 of this judgment, whilst the temporary derogation from Article 21(1)(b) and (c) of Directive 2003/54 granted by the contested directive is to be maintained until 31 December 2008. In those circumstances, there is no need to rule on the Council’s abovementioned request.

Costs

93. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. However, under the first subparagraph of Article 69(3) of those Rules, the Court may order that the costs be shared or that the parties bear their own costs where each party succeeds on some and fails on other heads. In this case, since the Parliament has applied for its costs and the Council has been substantially unsuccessful, it must be ordered to pay the costs. In accordance with the first subparagraph of Article 69(4) of those Rules, the Republic of Poland, the Republic of Estonia and the Commission which intervened in the proceedings must bear their own costs.

On those grounds, the Court (Grand Chamber) hereby:

1. Annuls Council Directive 2004/85/EC of 28 June 2004 amending Directive 2003/54/EC of the European Parliament and of the Council as regards the application of certain provisions to Estonia, in so far as it grants Estonia a derogation from the application of Article 21(1)(b) and (c) of Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC going beyond 31 December 2008 and imposes a corresponding obligation to ensure only a partial opening of the market representing 35% of consumption on 1 January 2009 and an obligation to communicate annually the consumption thresholds extending eligibility to final customers;

2. Dismisses the remainder of the action;

3. Orders the Council of the European Union to pay the costs;

4. Orders the Republic of Poland, the Republic of Estonia and the Commission of the European Communities to bear their own costs.