Adesman & Asociații obtains landmark ruling at the Constitutional Court regarding the contribution to the Energy Transition Fund imposed on electricity producers

Adesman & Asociații, which ensured the legal representation before the Constitutional Court of Romania of several electricity producers, achieved a significant victory, obtaining upholding the objection of unconstitutionality regarding the provisions of Article 15 and Annex No 6 of Government Emergency Ordinance No 27/2022, as amended by Government Emergency Ordinance No 119/2022. These provisions impose the obligation to contribute to the Energy Transition Fund for certain categories of energy market participants.

At its sitting on 7 November 2024, the Constitutional Court unanimously declared that these provisions infringe the constitutional principle of the fair distribution of tax burdens, enshrined in Article 56 of the Constitution, as well as the provisions of Article 45 of the Constitution concerning economic freedom and free enterprise. Thus, the Constitutional Court considered that the contribution obligation imposed on certain electricity producers affects fair competition on the energy market and discourages investment in renewable energy sources.

In view of the aspects highlighted by the press release of the Constitutional Court, we appreciate that this binding decision will undoubtedly have a significant impact on the energy industry, removing, in the context of it being declared unconstitutional, the obligation to pay the contribution to the Energy Transition Fund for the affected entities (upon publication of the decision, we will examine in detail the considerations of the Constitutional Court that led to this ruling and the implications for the entities targeted). In addition, the decision comes to underline the need for a fair tax framework that supports both economic freedom and the initiative to invest in sustainable energy, without discouraging their development through discriminatory tax burdens.

„This judgment represents a major victory for tax fairness and for the right of economic operators active in the energy market to compete under fair conditions and tax predictability”, stated Diana Adesman, Managing Partner at Adesman & Asociații. „We are both proud and grateful to have contributed to the clarification and restoration of a legislative framework that supports both industry interests and the fundamental, constitutional principles of economic freedom and initiative in the energy market.”.

Regarding the effects of the decisions of the Constitutional Court, on the one hand, this decision will take effect for the future, starting from the date of publication in the Official Gazette, for entities operating on the energy market. Thus, the provisions of Article 15 and of Annex No. 6 of Government Emergency Ordinance No. 27/2022, amended by Government Emergency Ordinance No. 119/2022, found to be unconstitutional, shall cease their legal effects 45 days after the publication of the Constitutional Court's decision, if, within this period, the legislature does not bring the unconstitutional provisions into line with the provisions of the Constitution. For the duration of this term, the provisions found to be unconstitutional are suspended by operation of law.

On the other hand, specifically regarding electricity producers that have brought administrative litigation actions challenging the contribution to the Energy Transition Fund and, where applicable, have also requested the refund of amounts paid under this title – litigation proceedings in which the exception of unconstitutionality was raised –, the situation is different: this decision will produce effects in cases currently pending before the courts of law, which will be required to take account of the aspects held by the Constitutional Court.