1 Introduction
Concessions to operate essential infrastructure, such as energy or transport, will often create an effective monopoly, where market forces are unable to achieve reasonable and efficient pricing. To prevent abuse of the monopoly position, the government may require third party access and regulated prices through tariffs. Today we particularly see this in the energy sector, where both electricity grids and also pipelines for the transportation of gas constitute monopolies. Historically however, price regulation is a well-known phenomenon in Norway, and the question of whether price regulation interferes with established rights or expectations has been the subject of several Supreme Court cases.(1) See e.g. Rt. 1924 p. 949, Rt. 1929 p. 771; Rt. 1933 p. 1041 and Rt. 1950 p. 87. This question has received new attention through the so called Gassled case, which concerned a change in tariffs for the upstream pipeline network for transportation of natural gas on the Norwegian continental shelf. This case was recently decided by the Supreme Court, in favour of the State.(2) HR-2018-1258-A.
If the concession gives a definitive right to charge a certain price throughout the concession period, a subsequent change of tariffs may be held invalid, either as lacking a legal basis or as an illegitimate reversal of an administrative decision (“enkeltvedtak”). It may also constitute a form of established right or property protected by the constitution, sections 97 or 105, or article 1 of the first additional protocol to the European Convention on Human Rights. However, even if the concession does not give any such fixed or definitive right to a certain tariff, the concessionaire may have certain reasonable expectations regarding the level of future tariffs. The concessionaire will have made considerable investments in reliance on the concession, and will have calculated on the basis of a certain tariff level, in order to get sufficient revenues to recover its investment with a reasonable profit. For this reason, it is generally advisable that changes of tariffs are subject to transparent, fair and predictable criteria. This is largely the case in the energy sector, as we consider further below. Despite this, the concessionaire may, however, have a reasonable expectation that tariffs, although subject to change, will nonetheless be reasonably stable and predictable. Moreover, the government may, through its representations or conduct, have contributed to the creation of certain expectations about the future level of tariffs.
In this article, we discuss potential bases of government liability for such disappointed expectations in the event of changed tariffs. In principle, this issue is relevant for all kinds of regulated infrastructure. We will nonetheless mainly focus on the energy sector, where the issue seems to have the greatest current interest and attention. The question of whether established economic positions enjoy constitutional protection as established rights or property, has been the subject of much academic attention, and will not be further discussed in what follows. Rather, our focus is on potential bases of government liability for disappointed expectations falling below the level of a proprietary interest enjoying constitutional protection.
More specifically, we shall explore two different lines of reasoning that may come together as a possible basis of government liability for breach of reasonable expectations regarding a certain level of tariffs. The first line of reasoning focuses on distinct standards for tariff regulation of transmission and distribution networks in the energy sector, and discusses whether such standards may, more generally, be considered as saying something about what can be deemed the normal and reasonable expectations of someone investing in infrastructure dependent on regulated tariffs. The second line of reasoning discusses breach of legitimate expectations as a basis of liability under Norwegian law. While such liability under Norwegian law has traditionally been perceived as an ordinary delictual liability for creating false expectations, we discuss whether it should instead be seen as a distinct basis of state liability that may also protect reasonable expectations of regulated tariffs having some level of stability, predictability and fairness.
The article is structured as follows: In section 2 we discuss the general basis of liability for government acts. In section 3 we discuss special considerations relating to tariff regulation, including the special criteria developed for electricity and gas transmission networks within the EU. In section 4 we discuss the reach of legitimate expectations as a distinct basis of state liability under Norwegian law. In section 5 we provide a short summary and conclusion.