Decision of the Supreme Administrative Court: Cross-subsidisation is in violation of unbundling regulation also in corporate restructuring

The decision issued 28 March 2024 by the Supreme Administrative Court repeals the Market Court's decision on the unbundling of Gasum’s business operations and the prohibition of cross-subvention in accordance with the requirements of the Energy Authority. The decisions of the Energy Authority will enter into force and the decision concerning penalty fee requested by the Agency will be returned to the Market Court for renewed consideration.

The Energy Authority submitted an appeal to the Supreme Administrative Court on a decision issued by the Market Court in November 2022 in which the Market Court had repealed the cross-subsidisation decisions issued by the Energy Authority to Gasum and rejected the proposal by the Agency for a penalty fee of EUR 79.7 million. The Energy Authority considered that the Market Court had applied the legislation incorrectly.

The Energy Authority considered that Gasum had acted in violation of the Natural Gas Market Act when changing the unbundling principles without justification in its financial statement and later transferring the funds of the monopoly business in connection with its corporate restructuring to businesses operating in a competitive market. In the view of the Energy Authority, such cross-subsidisation is prohibited for all companies operating in the electricity and natural gas markets. 

In this decision, the Supreme Administrative Court, like the Energy Authority, considers that unbundling regulation bans cross-subsidisation, and that this unbundling regulation must also be applied in corporate restructuring situations like mergers and demergers. The decision is significant for the supervision of unbundling as a whole and confirms the view of the Energy Authority that Gasum Oy has violated its unbundling obligations in connection with its corporate restructuring. The Supreme Administrative Court finds that the Market Court's interpretation on the application of unbundling regulation in the Natural Gas Market Act was incorrect.

The Supreme Administrative Court repealed the Market Court's ruling on the decisions issued by the Energy Authority to Gasum and brought the decisions of the Energy Authority into force. With regard to the proposal for a penalty fee, the Supreme Administrative Court stated that the Market Court should not have rejected the Energy Authority’s proposal for a penalty fee on the basis of the grounds presented in its decision and returned the matter to the Market Court for renewed consideration.

The Supreme Administrative Court also repealed the Market Court's decision obligating the Energy Authority to reimburse Gasum's legal costs.

Further information: Nora Kankaanrinta, Leading Legal Counsel, tel. +358 29 5050 076, Tiina Karppinen, Chief Specialist, tel. +358 29 5050 035 and Simo Nurmi, Director General, tel. +358 29 5050 011, emails: [email protected].

Decision of the Supreme Administrative Court KHO:2024:49 (in Finnish)