Reconciling private property rights with public utilities in the energy sector

1. Context

Many properties in Romania are encumbered by various public utilities such as water pipes, gas pipes, energy capacities, electric cables or other similar installations.

Although these utilities are necessary and serve the public interest, they restrict property rights to varying degrees and interfere with private interest. In particular, the presence of energy capacities or pipelines/mains built on privately owned property affects :

• The component of use is inherent to ownership through limitations of normal use. For example, the owner of a building burdened by such a utility will have difficulties in obtaining building permits or such permits may not be granted at all, will be obliged to grant a passageway for utilities, etc. Further, depending on the typology of the public utility, even the functional classification of the property within the Zoning Urban Plan may be affected;
•  The jus abutendi component of private property right,  deriving precisely from the limitation of the use of the real estate in various ways, which undeniably leads to a decrease in the circulation value of the real estate;

Furthermore, some of the public utility networks also include disused energy capacities or utility structures that have not been erected, which means that there is not even a public interest to be verified in order to justify the restriction of private property rights. However, even these disused structures limit the right of ownership because the legal provisions applicable to town planning and construction do not distinguish between functional and non-functional public utilities.

The following is a brief analysis of the possibilities for compensating damages suffered by owners whose buildings are burdened by public energy utilities, with the anticipation that the reasoning set out could be extended to other categories of public utilities.

2. Relevant electricity legislation

Law no. 318/2003 on electricity, Law no. 13/2007 on electricity and Law no. 123/2012 on electricity have successively regulated the regime of authorisations required for the construction of new energy capacities, as well as the  re-technologisation of existing ones, the rights and obligations deriving from the establishment authorisation and licences, and the rights and obligations of the holders of establishment authorisations and licences over third parties' property.

Specifically, Law No 13/2007 and Law No 123/2012 expressly states that the holders of establishment authorisations and licence holders shall benefit, under the terms of the law, from the following benefits in respect of the land and property owned publicly or privately by other natural or legal persons and the activities carried out by natural or legal persons in the vicinity of energy capacity.

•  for the duration of the construction and refurbishment work and the operation of the energy capacity, the following rights:
•  the right of use for the execution of the works necessary for the realisation or refurbishment of energy capacity
•  the right of use to ensure the normal operation of the capacity, for the necessary overhauls, repairs and interventions
• underground, surface or aerial rights of way for the installation of electrical grids or other equipment related to energy capacity and for access to their location
•  the right to obtain the curtailment or cessation of activities that could endanger persons or property and to the right of access to public utilities (Art. 16 para. (2) of Law 13/2007).

In a similar regulation, rights of use and easements are also recognised by Art. 12 para. (2) of Law No 123/2012.

From the provisions of Art. 16 para. (4) and (5) of Law No 13/2007 and Art. 12 para. (4) and (5) of Law no. 123/2012, it follows that if the owner of the land is not the State or the administrative-territorial unit, in which case the exercise of rights of use and easement is free of charge, the manner of exercising these rights depends on the time of construction of the energy capacity. In other words, the exercise of rights of use and easement over private property affected by energy capacity to be constructed after the entry into force of the law is based on a framework agreement, with a specific content, which will also include the amount of compensation due to private persons.

3. Remedies for lack of use due to public utilities under the Energy Acts

In relation to the relevant electricity legislation, two types of remedies are relevant:

•  the indemnity granted as a result of lack of use of property due to the existence of a right of use and easement under Law no. 13/2007 (art. 16 para. 9 and 10) and Law no. 123/2012 (art. 12 para. 10 and 11);
• compensation awarded as a result of damage caused by holders of establishment authorisations and licence holders in the exercise of the right of use and easement. Such compensation shall be due in the event of the restriction of private rights in connection with  re-technologisation or repair work;

For energy capacities and installations constructed after the entry into force of Law No 13/2007 and Law No 123/2012, we consider that the situation is clear, as the right to compensation for loss of use or damage is expressly regulated by the legislator.

However, the right to compensation in respect of energy capacities and installations built prior to the adoption of the above-mentioned legislation raises a number of questions. More specifically, from a per a contrario interpretation of the provisions of Article 16(1)(a) of the Directive, it is clear that the provisions of Article 16(1)(b) of the Directive and of (4) and (5) Law no. 13/2007 and Art. 12 para. (4) and (5) of Law no. 123/2012 are not applicable, it appears that for networks and capacities that were built before the entry into force of the law, the exercise of the rights in question is made without any convention and without payment of any allowances. This interpretation was also confirmed by the High Court of Cassation and Justice in Decision No 27/2019 in the Appeal in the Interests of the Law (binding).

As regards the right to obtain compensation for damage caused by holders of establishment authorisations and licence holders in the exercise of rights of use and easement, this can be claimed regardless of when the energy capacity was constructed or located (before or after the entry into force of Electricity Law No 13/2007 or Law No 123/2012).

4. Remedies for lack of use due to public utilities under the Civil Code

The possibility of compensation and indemnification of owners whose private property is damaged by the encumbrance of public utilities is also recognised by the Civil Code in Art. 621 para. (1) - (3) Civil Code:

"The owner is obliged to allow the passage through his land of building networks serving adjoining land or land in the same area, of the nature of water, gas or similar pipes, sewers and electric, underground or overhead cables, as the case may be, as well as any other installations or materials for the same purpose. This obligation shall apply only where passage elsewhere would be impossible, dangerous or very costly. In all cases, the owner is entitled to fair compensation. In the case of new utilities, the compensation must also be prior."

It follows that, to the extent that the provisions of Law No 123/2012 would not be applicable because the electrical installations would have been carried out before it entered into force, the injured parties can bring an action under the provisions of Art. 621 Civil Code.

The applicability of the provisions of Article 621 of the Civil Code is also temporarily limited by Article 59 of Law No 71/2011 implementing Law No 287/2009 on the Civil Code, which states that the provisions of Articles 602-625 of the Civil Code do not apply to legal situations arising prior to its entry into force.

Furthermore, for networks and capacities created prior to the entry into force of the Civil Code, i.e. 1 October 2011 and the entry into force of Laws No 13/2007 and No 123/2012, there is no express provision on the basis of which compensation is granted. Therefore, although owners may also rely on the provisions of the Civil Code concerning the legal limits of building networks in relation to Law No 13/2007 and Law No 123/2012, in practice there is no practical interest in doing so given the overlap of the effects of the special laws with the ordinary law.

5. Potential remedies in the event of damage to the exercise of property rights

We consider it inequitable that owners of buildings with energy networks and capacities built prior to 2007 should accept these restrictions on ownership free of charge because of a legislative vacuum.

In this regard, we believe that even in the latter case, actions can be brought before the courts based on de facto expropriation.

5.1. Concept 

The concept of de facto expropriation is not enshrined in Romanian law, this institution being a creation of the European courts and designates precisely for the situation in which the owner of a property loses all the attributes of ownership in favour of the state, without this deprivation being the object of a legal act, and such being a form of deprivation of property prohibited by law. It should be noted that de facto expropriation was also acknowleged by the European Court of Human Rights in the Burghelea v. Romania decision.

If energy networks or capacities exist on privately owned properties, they clearly detriment owners, who are unable to benefit from all the attributes of their right (use, disposal and enjoyment), thus depriving it of its content.

We also consider that the institution of "de facto expropriation" can be applied by national courts in view of the precedence of European law over national law. In this respect, we point to the provisions of Article 148 para. 4 of the Constitution, which contains the guarantee offered by the Parliament, the President of Romania, the Government and the judicial authority of the fulfilment of the obligations resulting from the act of accession to the constituent treaties of the European Union.

We consider it appropriate to include in the scope of application of Art. 148 para. 4 and the case-law of the European Union, the Romanian supreme court's position (the Constitutional Court and the former Supreme Court of Justice) stating that, in the field of European human rights law, the case-law of the European Court of Human Rights is a common body with the European Convention on Human Rights and is integrated into Romanian law, with the same principles being applied to the case law source as to the conventional source to which it is linked.

Similarly, we can consider that the same rule applies to the relationship between primary European Union law (as conventional rules) and case-law European Union law (as case-law rules), in the sense that the case-law European Union source must benefit, in Romanian law, from the application of all the principles valid for the primary European Community conventional source, therefore, in concrete terms, from the guarantee of compliance[1].

5.2. The claim based on de facto expropriation

We consider that in the case of de facto expropriation, owners may bring an action to claim compensation from the Romanian State, municipality, city or commune for the deprivation of their property rights.

The legal basis for this type of action and the procedure envisaged can be that of expropriation, as provided for by Law No 33/1990, which regulates formal expropriation. Thus, since we are talking about a real deprivation or damage to the right of ownership, the expropriation procedure will be applicable with all the consequences, i.e. the procedure followed is that with the presence of the public prosecutor and the amount of compensation will be determined by a commission of 3 experts.

In the event that the existence of impediments to the exercise of the right of ownership is established in practice, it will be demonstrated below that these impediments comply with the requirements of Article 1 of Additional Protocol No 1 to the E.D.O. Convention:

• whether it is provided for by law
•  it pursues a legitimate aim
•  whether it respects a fair balance of proportionality between the private interests of the applicant and those of the general interest.

Consequently, if the conditions in which the owner who is expropriated is in fact deprived of ownership of the property or this right is rendered meaningless, without fair and prior compensation, there is clearly an interference with the right. The question of the existence of general interest cannot be regarded as meeting the requirements of Article 1 of Protocol No 1 to the Convention, since there can be no question of the existence of a fair balance between private and general interests.

6. Conclusions

In the case of the encumbrance of the immovable property after the entry into force of Law No 13/2007 and Law No 312/2012 with easements or rights of use related to energy utility networks, the injured parties may benefit from both compensation and damages, as detailed in sections 2-4. In addition, including with regard to the encumbrance of buildings by easements and rights of use mentioned before the entry into force of Law No 13/2007, we consider that it is possible to compensate for the damage caused by limiting the right of private property according to the mechanism of expropriation for public utility.

MAXIM / Associates

Av. Andreea Talida Ardelean

[1] C-L. POPESCU, Relations between European Union law and Romanian domestic law, in the light of the revised constitutional provisions, Romanian Journal of European (Community) Law, number 2/2004.