AFME, CMCE, Europex, FESE, FIA, ISDA and FIA EPTA, representing a wide range of market participants (e.g. energy firms, trading venues, banks, liquidity providers and other market participants) in wholesale energy markets, have published a letter in anticipation of the trilogue meeting on the 26th October 2023 on the review of the Regulation of Wholesale Energy Market Integrity and Transparency (REMIT) in relation to the supervision of third country firms.
We share the objectives of the REMIT review and are keen to assist ACER and the National Regulatory Authorities (NRAs) to ensure that they are able obtain the necessary information from third-country firms to effectively supervise European energy wholesale markets. However, we are firmly convinced that it is disproportionate to require third-country firms to declare an office in the EU from which they carry out their principal activities, as proposed by the European Parliament in their agreed position on Article 9.
The clear feedback we received from third-country firms is that the office requirement would constitute a considerable market access barrier prompting many non-EU firms to refrain from trading European wholesale energy products, whilst these markets rely on global participation for their liquidity. We strongly believe that the Council General Approach, proposing the designation of a representative authorised to act on its behalf, is a less disruptive approach to ensure the proper investigation of third-country firms. The designation of a representative reflects established international practices for market access and thereby avoids disturbing newly established LNG supply chains with exporting countries like the US, on which Europe now greatly relies for its energy security.
Considering that the exports of US LNG to the EU more than doubled last year rising to 56 bcm in 2022, those US firms may not be able to, or not willing to comply with an EU office requirement. With the economic recovery of China, Europe is competing in a global market for LNG imports, whilst exporters of LNG are unlikely to choose the jurisdiction with the highest barriers.
Moreover, the necessity and impact of an office requirement have not been properly assessed. Before adopting such a far-reaching measure, policymakers should rather explore alternative measures, including the role that European energy exchanges could play in assisting NRAs in their supervisory functions. Exchanges typically have far-reaching powers under their market rules to request information from market participants, including third-country firms, in order to conduct proper market surveillance. In particular, exchanges can make inquiries, initiate investigations and even suspend from trading market participants in third countries without imposing a location requirement on them. Furthermore, as these firms have designated teams in place to respond and comply to these regulatory requests from exchanges, it seems inappropriate to impose a location requirement on them.
In light of the above, we strongly encourage the co-legislators to adopt the Council position with respect to Article 9 and refrain from introducing any additional requirements that may undermine the progress we have made following last year’s energy crisis.
- Market Structure