SALENTO ENERGY S.R.L. AND NUOVO SOLE S.R.L. v. ITALY

FIRST SECTION

DECISION

Applications nos. 20445/15 and 59246/17
SALENTO ENERGY S.R.L. against Italy
and NUOVO SOLE S.R.L. against Italy

The European Court of Human Rights (First Section), sitting on 9 January 2024 as a Chamber composed of:

 Marko Bošnjak, President,
 Alena Poláčková,
 Krzysztof Wojtyczek,
 Lətif Hüseynov,
 Gilberto Felici,
 Ivana Jelić,
 Raffaele Sabato, judges,
and Ilse Freiwirth, Section Registrar,

Having regard to the above applications lodged by two Italian companies, Salento Energy S.r.l. (“the first applicant company”) and Nuovo Sole S.r.l. (“the second applicant company”) on 17 April 2015 and 4 August 2017 respectively,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant companies,

Having deliberated, decides as follows:

THE FACTS

1.  The first applicant company was represented by Ms I. De Francesco, a lawyer practising in Corsano (Lecce). The second applicant company was represented by Mr V. Onida and Ms B. Randazzo, lawyers practising in Milan.

2.  The Government were represented by their Agent, Ms E. Spatafora, and subsequently by Mr L. D’Ascia, her successor.

3.  The facts of the case may be summarised as follows.

4.  Legislative Decree no. 387 of 29 December 2003 (“Legislative Decree no. 387/2003”) transposed into national law Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market.

5.  Article 7 of Legislative Decree no. 387/2003 included measures encouraging the uptake of photovoltaic installations and instructed the Minister for Productive Activities, together with the Minister for the Environment and the Protection of Natural Resources, to issue further ministerial decrees defining the criteria for incentivising the production of electricity by photovoltaic installations. It stated, among other things, that the decrees should provide for a specific feed-in tariff in a progressively decreasing amount to be paid for a period that would ensure a fair return on investment and operating costs. Moreover, the decrees should set a maximum limit on the cumulative generation capacity of all the installations which would be eligible for the incentive.

6.  Three ministerial decrees, also known as “Energy Tariffs” (Conti Energia), established the relevant criteria. They provided that fixed feed-in tariffs should be awarded depending on the size of the installations and on the date of their entry into service and that the feed-in tariffs should be awarded for twenty years. The second and third Energy Tariffs added that they should be “constant in current currency” (costante in moneta corrente) for the twenty-year period.

7.  The feed-in tariff awarded to each photovoltaic installation was then determined by an agreement between the energy producer concerned and Gestore dei Servizi Energetici S.p.A., a company owned by the Ministry of Economy and Finance which is responsible for the payment of feed-in tariffs (hereinafter “GSE”) on the basis of a standard form contract drafted by the Regulatory Authority for Electricity and Gas. The standard form contract did not contain any provision authorising GSE to unilaterally amend the clauses of the agreement.

8.  On 29 March 2011, after the adoption of the third Energy Tariff, Legislative Decree no. 28 of 3 March 2011 (“Legislative Decree no. 28/2011") entered into force. It transposed into national law Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources. That directive amended and subsequently repealed, inter alia, Directive 2001/77/EC.

9.  Legislative Decree no. 28/2011 was aimed at, among other things, progressively reviewing and improving the incentive mechanisms awarded to producers of renewable energy, both in terms of safeguarding investments and ensuring their flexibility in the light of market developments and technological progress (Article 23 of the Decree).

10.  Article 24 of Legislative Decree no. 28/2011 clarified that feed-in tariffs should remain constant for the entire duration of the contract and that they could take into account the economic value of the energy produced. Pursuant to that Article, the feed-in tariffs should be granted by private-law contracts with GSE. It also provided that the conditions to implement the incentive mechanisms should be established by ministerial decrees.

11.  The fourth and fifth Energy Tariffs then established the overall annual costs for incentives and systems of feed-in tariffs in a progressively decreasing amount.

12.  The feed-in tariff awarded to each photovoltaic installation was determined by an agreement with GSE on the basis of a standard form contract. On 6 December 2012, without prejudice to the agreements in force, the Regulatory Authority for Electricity and Gas amended the standard form contract to include a provision that authorised GSE to unilaterally amend clauses of the agreement. However, that decision did not affect the agreements entered into by the applicant companies (see paragraph 18 below).

13.  On 25 June 2014 Decree-Law no. 91/2014 entered into force. It reviewed the incentive schemes as a whole in order to optimise the management of the incentives and promote a more sustainable policy of support for renewable energies.

14.  Under section 26(3), as from 1 January 2015 feed-in tariffs for energy produced by photovoltaic installations with a rated power of more than 200 kilowatts (kW) – thus including the applicant companies’ installations – were to be revised according to one of the following options, to be chosen by the producers: (a) an extension of the length of the agreement to twenty-four years, together with a reduction of the tariff; (b) a reduction of the tariff during an initial period followed by an increase of the tariff in equal measure during a second period; or (c) a fixed reduction of the tariff by a certain proportion, namely 6% for installations with a rated power between 200 kW and 500 kW; 7% for installations with a rated power between 500 kW and 900 kW; or 8% for installations with a rated power of more than 900 kW. In the event of failure to inform GSE of the preferred alternative by 30 November 2014 it would apply the third option.

15.  Moreover, section 26 of the Decree-Law allowed the beneficiaries of feed-in tariffs to obtain financial loans. The amount borrowed could cover up to the difference between the incentives already obtained at 31 December 2014 and those as revised by the Decree-Law. Such loans could be granted from special funds or be guaranteed by a State-controlled financial institution (Cassa Depositi e Prestiti S.p.A.).

16.  Lastly, entitlements to up to 80% of the feed-in tariffs could be sold to other beneficiaries.

17.  The applicant companies, which are the owners of photovoltaic installations for producing energy, were eligible to receive feed-in tariffs under one of the five “Energy Tariffs”.

18.  On various dates indicated in the appended table, the applicant companies entered into separate agreements with GSE, each of which concerned a different photovoltaic installation. On the basis of those agreements, GSE awarded the applicant companies feed-in tariffs for twenty years in compliance with the applicable Energy Tariff. The agreements also specified that any amendment should be approved in writing by the parties.

19.  After the entry into force of Decree-Law no. 91/2014 (see paragraph 13 above), the first applicant company did not inform GSE which of the options for the reduction of the feed-in tariff it preferred and alternative (c) was applied by default. The second applicant company chose option (b).

20.  On 22 December 2014 the second applicant company brought proceedings in the Lazio Regional Administrative Court, contending that the three options under section 26(3) of Decree-Law no. 91/2014 entailed a significant reduction of the feed-in tariff originally set down by the Energy Tariff applicable in each case, with serious consequences for their financial situation. It complained, inter alia, that the provision in question was unconstitutional.

21.  On 28 December 2015 the Lazio Regional Administrative Court requested that the Constitutional Court review the constitutionality of section 26 of Decree-Law no. 91/2014.

22.  On 24 January 2017, in another set of proceedings concerning the same issue, the Constitutional Court found that section 26(3) of Decree-Law no. 91/2014 was constitutional (judgment no. 16 of 2017). The relevant parts of the Constitutional Court’s judgment read as follows:

“... In the context of the overall regulatory framework, the introduction of the scheme of support for renewable energies displays characteristics of long-term stability aimed at addressing the need to provide certainty for investors; Legislative Decree no. 28 of 2011 ... provides in particular that ‘the incentive shall remain constant throughout the period of entitlement’.

The guarantee that the incentive would remain constant throughout the period of entitlement does not imply as a consequence that the corresponding measure should remain unchanged for twenty years or that, during the same period, it should remain immune from the adjustments which are typical of long-term agreements. That is even more the case if one considers that the agreements entered into with GSE are not contracts intended for the exclusive benefit of the operator – [in whose interest it would be to have] the initial conditions unchanged for twenty years, even if the technological conditions were to change profoundly – but constitute adjustment tools aimed at incentivising certain energy sources balanced against other sources of renewable energy, and also against minimal sacrifice for end-users, who also bear its economic burden.”

23.  On 12 June 2017, in the light of judgment no. 16 of 2017, the Constitutional Court dismissed as manifestly ill-founded the
above-mentioned request by the Lazio Regional Administrative Court for a constitutional review in the context of the proceedings instituted by the second applicant company.

24.  The proceedings brought by the second applicant company in the domestic courts were then resumed before the Lazio Regional Administrative Court. Those proceedings were still pending when the second applicant company submitted its observations in the instant case to the Court.

25.  The first applicant company did not institute any domestic proceedings and lodged its application directly with the Court.

26.  In the same set of proceedings which gave rise to the above‑mentioned decision of the Constitutional Court (see paragraph 22 above), the domestic courts also referred their case to the CJEU for a preliminary ruling.

27.  They asked the CJEU to determine, in particular, whether the national legislature was permitted under European Union (EU) law to intervene in a manner that adversely affected not only the terms of the general incentive scheme but also the agreements that the operators had entered into individually with GSE. The case concerned Article 3(3)a of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 and Article 17 of the Charter of Fundamental Rights of the European Union (right to property), in the light of the principles of legal certainty and protection of legitimate expectations.

28.  On 15 April 2021, in the case of Federazione nazionale delle imprese elettrotecniche ed elettroniche (Anie) and Others and Athesia Energy S.r.l. and Others v Ministero dello Sviluppo Economico and Gestore dei servizi energetici (GSE) S.p.A., ECLI:EU:C:2021:280, the CJEU concluded the following:

“Article 3(3)(a) of Directive 2009/28/EC ... amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC, and Article ... 17 of the Charter of Fundamental Rights of the European Union, read in the light of the principles of legal certainty and of the protection of legitimate expectations, must be interpreted as not precluding national legislation which provides for the reduction or delay of the payment of incentives for energy produced by solar photovoltaic installations which were previously granted by administrative decisions and confirmed by special agreements concluded between the operators of those installations and a public company, where that legislation concerns incentives for which provision has previously been made but which are not yet due.”

COMPLAINT

29.  The applicant companies complained that the reduction of their feed‑in tariffs following the entry into force of section 26 of Decree‑Law no. 91/2014 had amounted to an interference with their property rights as the national authorities had unilaterally reduced the incentive tariffs awarded under each agreement, in violation of Article 1 of Protocol No. 1 to the Convention.

THE LAW

30.  Having regard to the similar subject matter of the applications, the Court finds it appropriate to examine them jointly in a single decision.

31.  The Government objected that the first applicant company had not brought proceedings in the Regional Administrative Court and that the second applicant company had failed to appeal against the decision of the Lazio Regional Administrative Court to the Consiglio di Stato. They also submitted that the applicant companies were not entitled to any “possession” within the meaning of Article 1 of Protocol No. 1 to the Convention as they did not have any legitimate expectation that the feed-in tariffs would be maintained at a constant level for the whole duration of their agreements with GSE. Lastly, they submitted that the applicant companies had not suffered any significant disadvantage within the meaning of Article 35 § 3 (b) of the Convention.

32.  The Court does not find it necessary to examine the Government’s preliminary objections concerning the non-exhaustion of domestic remedies, the inapplicability ratione materiae of Article 1 of Protocol No. 1 and the lack of significant disadvantage in so far as, even assuming that the applicant companies had a “legitimate expectation” of obtaining effective enjoyment of a property right – a question which has also been examined by the CJEU in the light of EU law in the framework of similar proceedings
(see paragraphs 26-28 above) – the applicant companies’ complaint is in any event inadmissible for being manifestly ill-founded for the reasons set out below.

33.   The applicant companies claimed that the reduction of their feed-in tariffs, following the entry into force of section 26 of Decree-Law no. 91/2014, had amounted to an interference with their property rights under Article 1 of Protocol No. 1 to the Convention, which reads:

 “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

34.  The Court reiterates that neither the Convention nor the Protocols thereto preclude the legislature from interfering with existing contracts, although special justification is required for such interference (see Bäck v. Finland, no. 37598/97, § 68, ECHR 2004-VIII, and Mellacher and Others v. Austria, 19 December 1989, § 50, Series A no. 169).

35.  In the present case, the reduction of the feed-in tariffs was part of an overall review of the energy sector that was aimed at providing ongoing support to producers of renewable energy and reducing the costs to users of electricity derived from renewable energy (see paragraph 13 above). In accordance with section 23 of Decree-Law no. 91/2014, the purpose of the legislative intervention was to reach a balanced distribution of costs among users of renewable energy, minimising those borne by end-users. This was deemed necessary on account of the growing economic burden that feed-in tariffs placed on the end-users and the reduction of production costs as a result of technological developments in that sector.

36.  The Court also notes that, by its judgment of 15 April 2021, the CJEU ruled on the same case which gave rise to the Constitutional Court’s judgment referred to in the domestic proceedings in the second applicant company’s case, with regard in particular to the compatibility of the domestic reduction of feed-in tariffs for photovoltaic installations with Article 17 of the Charter of Fundamental Rights of the European Union (right to property). The CJEU concluded that the applicable EU law had to be interpreted as not precluding national legislation which provided for the reduction or delay of the payment of incentives for energy produced by solar photovoltaic installations (see paragraphs 26-28 above).

37.  The Court is aware of the wide margin of appreciation available to domestic authorities in implementing social and economic policies
(see Lekić v. Slovenia [GC], no. 36480/07, § 105, 11 December 2018, and Béláné Nagy v. Hungary [GC], no. 53080/13, § 113, 13 December 2016), including in areas such as the regulation of the energy sector. In its assessment, the Court must also bear in mind the wide margin of appreciation applicable in cases concerning the reduction of “incentives”, and therefore a benefit or a privileged right granted by the State (see Azienda Agricola Silverfunghi S.a.s. and Others v. Italy, nos. 48357/07 and 3 others, § 105, 24 June 2014). In the light of the above, the Court is satisfied that the interference at issue was “in the public interest” and that special reasons justifying an interference with existing contracts were provided.

38.  Furthermore, the reduction of feed-in tariffs was not automatic (compare Mellacher and Others, cited above, § 53). Producers were given five months to choose from among three alternative regimes and the scheme established by alternative (c) even varied the percentage of reduction depending on the rated power of the installation. Emphasis should also be placed on the fact that the measure in issue did not affect incentives previously paid, but only applied from 1 January 2015. Consequently, it did not have retrospective effect (see paragraph 14 above).

39.  Section 26 of Decree-Law no. 91/2014 also introduced two compensatory remedies, namely the possibility of obtaining special financial loans and of selling up to 80% of the value of the entitlements to feed-in tariffs (see paragraphs 15 and 16 above), which were implemented by a decree of the Ministry of Economy and Finance issued on 29 December 2014. There is nothing in the case files to suggest that the applicant companies were not in a position to benefit from those remedies (compare Lekić, § 109,
and Mellacher and Others, § 53, both cited above).

40.  The Court recalls that, provided that the legislature remains within the bounds of its margin of appreciation, it is not the Court’s task to say whether the legislation represented the best solution for dealing with the problem or whether the legislature’s discretion should have been exercised in another way. The possible existence of alternative solutions does not in itself render the contested legislation unjustified (see J.A. Pye (Oxford) Ltd v. the United Kingdom, no. 44302/02, §§ 43‑45, 15 November 2005). In the instant case, considering the overall structure of section 26 of Decree-Law no. 91/2014 (compare Mellacher and Others, § 53, cited above), the legislature appears to have taken into account the needs of the producers of solar energy and avoided placing an excessive burden on the applicant companies.

41.  Ultimately, the Court highlights that the applicant companies failed to produce any detailed information as to the consequences of the interference at issue on their financial situation (compare Azienda Agricola Silverfunghi S.a.s. and Others, cited above, § 106). The first applicant company provided generic tables indicating the expected loss of revenue caused by the interference. The second applicant company submitted balance sheets for the years 2013‑2018, tax declarations concerning the years 2013-2017 and an expert report indicating that the reduction of feed-in tariffs resulting from section 26 of Decree-Law no. 91/2014, together with an order for the return of sums awarded as tax adjustment by a ministerial decree of 6 February 2006, had undermined its financial stability vis-à-vis its creditors. However, the report refers indiscriminately to the consequences of two different interferences taken together, despite the fact that the second applicant company did not raise any complaint in respect of the second of those interferences (the return of sums awarded as tax adjustment). Furthermore, the report fails to take into account the impact of the compensatory remedies (see paragraphs 15 and 16 above). Therefore, the Court concludes that there is no evidence as to what effects the interference actually had on the applicant companies’ financial position.

42.  Accordingly, the Court finds that the claim of the applicant companies that they were made to bear an excessive individual burden is unsubstantiated.

43.  On the basis of the foregoing, the Court considers that the present applications are manifestly ill-founded within the meaning of Article 35 § 3 (a) and must be rejected pursuant to Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Decides to join the applications;

Declares the applications inadmissible.

Done in English and notified in writing on 1 February 2024.

 Ilse Freiwirth Marko Bošnjak
 Section Registrar President