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The legal nature of the right of access to export main oil pipelines and its assignment

Korepanov Konstantin Vladimirovich, Master of Jurisprudence (Russian School of Private Law), post-graduate student of the Energy Law Sub-Department of O.E. Kutafi n Moscow State Law University

In this article the author studies issues of oil transportation through main pipelines, presents a legal analysis of changes in the applicable law, reviews examples of judicial practice, and draws conclusions on possible legislative improvements.

With certain political and economic reasons, particularly for competition and free-market promotion, the state assumes the role of an arbitrator for distribution of a resource, which amount is limited and, at the same time, distributable.

Decree of the President of the Russian Federation dd. May 23, 1994 No. 1007[1] cancelled allocation of quotas for export goods. Then, in pursuance of Decree of the President of the Russian Federation dd. July 1, 1994 “On Export Supplies of Crude Oil and Petroleum Products in 1994”[2] the Government of the Russian Federation adopted Resolution dd. December 31, 1994 No. 1446, whereby it approved “General Terms for Using the System of Main Oil Pipelines, Oil-Product Pipelines and Terminals in Seaports for Export of Crude Oil and Petroleum Products Outside the Customs Territory of the Russian Federation”[3]. These terms stipulated distribution of the access right based on the principle of fairness in proportion to the amounts of extracted oil. Later on, this Resolution was updated with the rules for assignment of the access right introduced by Resolution of the Government of the Russian Federation dd. July 10, 1995 No. 697[4].

D.D. Logofet specifies that these Resolutions established a practice of distributing the system’s export transport capacity among producers by a special commission using quarterly schedules. According to Transneft and oil producers as independent parties to civil commerce, the Government of the Russian Federation set a procedure for them to conduct certain activities having no grounds specified in any Law or Decree of the President of the Russian Federation. It is clear that the access right as it is represents a purely administrative way to distribute the system’s export transport capacity with no civil law consequences for Transneft and users of the system[5]. S.L. Sitnikov agrees with such a viewpoint[6]. Moreover, in the free market the idea that the producer can sell any “right” donated by the state seems to be groundless[7].

Later on, Resolution of the Government of the Russian Federation dd. March 29, 2011 No. 218 “On Approval of the Rules for Provision of Non-Discriminatory Access to Transportation by Natural Monopoly Entities of Crude Oil (Petroleum Products) through Main Pipelines in the Russian Federation”[8] cancelled the said Resolutions of the Government of the Russian Federation.

With adoption of Federal Law dd. August 17, 1995 No. 147-ФЗ “On Natural Monopolies”[9], main pipeline transportation of oil was referred to natural monopolies’ activities. Federal Law dd. August 8, 2001 No. 126-ФЗ[10] enhanced the Natural Monopolies Law. From now on, the right of access to the system of Russian main pipelines and terminals in seaports when exporting oil outside the customs territory of the Russian Federation was granted to organizations engaged in oil production and registered in the prescribed manner, and to organizations that are parent companies of oil-producing organizations in proportion to the amounts of extracted oil delivered to the main pipeline system in view of 100 percent transport capacity of main pipelines (based on their technical performance).

The procedure for settlement of disputes on fair provision of access rights to export has no clear definition. However, the consignor can find out the “quarter coefficient”. In terms of export it ranges between 26% and 45% (40% for the second quarter of 2006). The product of the reported amount and the coefficient is the amount to be supplied for export[11].

Lack of explicit legislative reference to assignability of the access right gave rise to an opinion that this law stipulates no assignment of the access right. It specifies that the access right may be granted directly to the producer, any assignment of the right contradicts this law[12].

The opinion that the state pursuant to the said Resolutions of the Government of the Russian Federation grants free access rights is unacceptable. In such relations, the producer receives no right from the state (both in distribution of the access right pursuant to the said Resolutions of the Government of the Russian Federation and as permitted by the Natural Monopolies Law) – the producer is entitled to request the state to resolve the issue of access, but provision by the state of this access to some extent does not mean granting the right — this process represents distribution of the right on relevant bases, i.e. a process completely different by its nature. Only those who have the right can grant it. The well-known principle of the Roman law: Nemo plus iuris ad alium transferre potest, quam ipse haberet (“No one can transfer more rights than he himself owns”) – did not change its meaning over the millennia. In this case, the state does not transfer the rights, it distributes them. What is the right of access to export itself?

Clause 5 of the Regulation on the Procedure for Assignment of the Right of Access to the System of Main Oil Pipelines and Terminals in Seaports when Exporting Oil Outside the Customs Territory of the Russian Federation[13] stipulated that any organization, to which the access right was assigned, should transport oil under a transportation contract between JSC Transneft and the oil producer supplying oil within the assigned right of access. The effect of this clause is that the right is assigned under the already-existing and signed contract.

Pursuant to the Standard Contract for Main Oil Pipeline Transportation of Oil, the procedure for oil transportation is as follows.

The consignor sends to Transneft, OJSC a request for main pipeline transportation of oil, which is a document stating the amount of oil offered by the consignor for transportation.

Based on this request, JSC Transneft, OJSC signs a one-year contract for oil transportation with the consignor.

No later than 45 days prior to the beginning of the respective quarter, the consignor submits a quarterly request for oil transportation.

The consignor shall submit a monthly request copy prior to the 15th day of the month preceding the month, in which oil is to be transported, with subsequent provision of the original prior to the 1st day of the month, in which oil is to be transported. The monthly request is a document stating the amount of oil planned by the consignor to be delivered for transportation within a month. The consigner’s oil is accepted by Transneft daily in equal parts of the amount of oil specified in the monthly request.

The consignor shall submit oil transportation orders needed for execution of routing instructions to a pipeline company prior to the 15th day of the month of transportation. The order is the consignor’s instruction to Transneft to transport a certain amount of oil not exceeding the amount specified in the monthly request for oil transportation.

The routing instruction is a document executed by Transneft for transportation of a tender through the main oil pipeline system pursuant to the consignor’s transportation order sent to Transneft’s organizations as an instruction to accept/deliver, transport, transfer, load/unload the consignor’s oil.

Oil transportation itself is carried out by Transneft according to the routing instruction based on the order for transportation of the tender.

Pursuant to cl. 1, Art. 432 of the Civil Code of the Russian Federation, a contract is deemed to be concluded, if the parties reach an agreement on all fundamental terms of the contract. The one-year contract for transportation lacks fundamental terms needed for transportation of a particular tender: the exact amount of oil to be transported from the place of acceptance to the place of delivery and the period of time. The one-year contract for transportation has only general terms that legalize the parties’ relations and, consequently, pursuant to cl. 1, Art. 432 of the Civil Code of the Russian Federation, this contract cannot be the basis for transportation of a particular tender without any agreement on basic terms. This contractual system mutatis mutandis is similar to the contractual system for freight transportation and transportation arrangement (Art. 798 of the Civil Code of the Russian Federation).

In the process of transportation, this contractual system inter alia will result in two types of the access right: the access right under the contract for transportation arrangement and the access right under the contract for transportation of a particular tender. In the first case, the access right will represent the right to sign a contract(s) for transportation of a particular tender through the main pipeline by transport in a certain direction in a certain amount and within a certain period of time. In the second case, the access right will represent the right to request transportation of a particular tender in a certain direction in a certain amount and at a certain time.

In case of assignment of the access right – the right of claim under the contract for transportation of a particular tender, this assignment shall be classified as assignment of the right stipulated by Section 24 of the Civil Code of the Russian Federation.

Assignment of the access right under the contract for transportation arrangement means assignment of the right to sign the contract for transportation - the question arises as to whether such an assignment is possible.

The Civil Code of the Russian Federation stipulates that the right to sign a contract arises particularly from the law (public contract) or from the parties’ agreement (preliminary contract). In fact, this right is an ability to oblige the other party to change its rights and duties (since this is the aim of signing any contract) without any consent of this party.

The German legal doctrine called this opportunity Gestaltungsrecht, and this issue was for the first time closely examined in the work of Seckel “Die Gestaltungsrechtedes bürgerlichen Rechts”[14]. According to the traditional definition of Gestaltungsrecht, it means an ability of the Gestaltungsrecht-holder to make a unilateral action of legal value, which shall be perceived by the other party and which unilaterally changes the other party’s current legal status[15]. Since Gestaltungsrecht is an external intervention in the person’s legal status, it can arise only out of legislative references or out of a contract with this person, for which Gestaltungsrecht will operate. Nowadays it is generally accepted that Gestaltungsrecht is a form of manifestation (Erscheinungsform) of the legal right[16].

Traditionally, Gestaltungsrecht in the German doctrine is divided into three groups to determine its assignability: they are divided into autonomous (selbständige) or non-autonomous (unselbständige) Gestaltungsrecht; the latter in its turn includes the beneficiary’s right under a third party beneficiary contract[17]. The autonomous Gestaltungsrecht represents Gestaltungsrecht that can have its value, meaning that there is no need for the person holding Gestaltungsrecht to perform any other additional actions for changing the legal status[18]. This type can include, in particular, the pre-emptive right. The court practice of the Supreme Court of Germany developed a general rule to certify that general provisions on debtor-creditor relations stipulated by § 413, 398 of the Civil Code of Germany may be similarly applied to such autonomous Gestaltungsrecht[19].

The Spanish legal doctrine calls the possibility of such actions derechopo testativo (literally - “the right of power”). It is also noted that the major part of modern civil law treats derechopo testativo as a type of legal rights (derecho subjectivo) meaning the power based on the parties’ relations, which helps the rightholder by declaration of its own and sole will (acto unilateral) to cause a change in the legal status of a person of incidence, who cannot but bend to this will[20]. As an example of a similar right, one can mention the co-owner’s right to request a share in joint ownership (Art. 1317 of the Civil Code of the Republic of Chile).

It is, however, noted that the very notion of such rights exceeds the notion of legal rights (derecho subjectivo), which is why the category of derecho potestantivo was elaborated[21]. The Supreme Court of Spain in its Decision dd. May 11, 1966 stated thatderecho spotestativos authorizes or empowers its holder to create a favorable legal effect and power over others, while discontinuing the legal status that existed prior to this right”[22]. As for assignability of this right, keeping in mind that it refers to the legal rights, it might be suggested that the general rule of cession is applicable to the transfer of such rights as well.

In Russia they believe that the study of this kind of rights or powers began with the article of M.M. Agarkov “The Legal Nature of the Rail Transportation Contract”[23], in which he based on Sekel’s theory of Gestaltungsrecht in the context of rail transportation assumed that the consignor exercises its right to change the carrier’s legal status – obligates it to carry out transportation by presenting the freight for shipment. In the end, M.M. Agarkov draws a conclusion in this article on the non-contractual nature of rail transportation and goes further – extends this approach to municipal enterprises’ supplies of water, gas, electric power and postage to the population[24].

If this theory is blindly extended to the current civil law, namely to regulation of the public contract, it may be concluded that the non-contractual theory of relations is applicable to all activities associated with the public contract. We believe that in all validity of M.M. Agarkov’s theory we should distinguish the very right to change another person’s legal status (in this case the consumer’s right to request an organization engaged in the related activities to sign a contract) and full and detailed imperative regulation of terms of such a contract by the rule of law. In one instance, such as rail transportation, regulation is far more detailed than regulation of terms of main pipeline transportation contracts for gas or oil[25]. Therefore, sometimes “approval of terms” drops out of the scheme of signing the public contract “the consumer’s request to sign the contract” – “approval of terms” – “signing the contract”, and sometimes remains in the scheme.

If we go back to the subject stated in the title of this article, then where the right of access to the oil export pipeline system means the right from the one-year organizational transportation contract to sign a contract for transportation of a specific tender, its assignment shall mean the assignment of the right to change the legal status of a transport organization – signing the contract for transportation of a particular tender.

The Russian court practice applies by analogy the rules of cession to the issue of assignability of the right to change another person’s legal status: no transfer of rights inseparably related to the creditor identity to any other person is allowed (Art. 383 of the Civil Code of the Russian Federation). Through this approach, the Supreme Court of the Russian Federation considered assignability of the right to terminate the contract[26], assignability of the pre-emptive right in joint ownership[27] (therein it was directly called the property right) and the right to request transfer of real estate for ownership[28]. We should acknowledge the validity of this approach and note that it is acceptable in the other states considered above.

The question arises as to whether the right to sign the contract for transportation of a particular tender is the right inseparably related to the creditor identity[29]. Thus, we can interpret the opinion of D.D. Logofet, who states that, if the producer is for some reason unable to use the access provided to it, the consistent enforcement of provisions of Federal Law “On Natural Monopolies” prompts distribution of the unclaimed access among all other producers based on the same principles as the initial access. Indeed, if in this situation the producer transfers (sells) its access to any other producer, the latter will be able to transport more than he is entitled to transport under Federal Law “On Natural Monopolies”. Then, if the right of access is transferred (sold) to any organization other than oil producer, it again contradicts the provisions of this law stipulating that the access should be provided only to oil producers[30].

First, in all validity of this opinion it is striking that there is no prohibition of assignment in the very Law on Natural Monopolies. In this regard, a reference to the impossibility of assignment as such in this law[31] should not be interpreted as a prohibition of such an assignment, since cession of the access right in its both types (as the right to sign a contract for transportation of a particular tender and the right to request transportation of a particular tender) is deemed acceptable by the Civil Code of the Russian Federation.

Second, when addressing the inseparable relation between the access right and the creditor identity, it seems that it is the issue of law policy. If the state gains from provision of equal and proportional access both at initial distribution of the access right and in case of its disuse by any rightholder in order to ensure competition in the market of export oil supplies, then D.D. Logofet’s opinion can be used, but if there is no such purpose and the state needs only to ensure proportionality of initial distribution of access, this right will have no relation to the creditor identity. But in our opinion, D.D. Logofet’s opinion does not result from current federal legislation and, in particular, the Natural Monopolies Law[32]. Moreover, the oil producer loses the right to export transportation to some extent, when it sells the access right, and thus creates consequences for itself rather than for the market. The rightholder is free in its right to sign or not to sign an access right assignment contract, and the disposal of this right (when an affiliate does not change its status) influences its business activities rather than competition in the commodity market, except for violations of antitrust laws (e.g., cartel).

Based on the above, it can be stated that the state should have strong reasons to introduce a prohibition of further assignment of the access right in the private law. That’s why limitations of assignment of the access right in the current and past regulatory legal instruments are of special policy-and-law and legal interest.

Cl. 2 of above Regulation of the Ministry of Fuel and Energy of the Russian Federation dd. August 4, 1995 “On the Procedure for Assignment of the Right of Access to the System of Main Oil Pipelines and Terminals” stipulates that assignment shall not exceed a third of the approved quarterly schedule (monthly schedule), and also states that no assignment of the access right is allowed. And cl. 23 of the Rules for Provision of Non-Discriminatory Access to Transportation by Natural Monopoly Entities of Crude Oil (Petroleum Products) through Main Pipelines in the Russian Federation[33] stipulates that transfer (assignment) of the right to transportation of crude oil (petroleum products) is only possible between legal entities engaged in extraction (production) of crude oil (petroleum products), forming the same group as the service consumer.

As it was already noted above, in all its types the access right is a property right, because it can be alienated under current legal regulation, and, therefore, it is an object of civil rights (Art. 128 of the Civil Code of the Russian Federation). In turn, it means that the provisions on transferability of objects of civil rights also cover this access right. Therefore, the rules of cl. 2, Art. 129 of the Civil Code of the Russian Federation stating that the types of objects of civil rights, which presence in commerce is prohibited, shall be explicitly stated in the law, and the types of objects of civil rights that can belong only to certain parties to commerce shall be defined in the manner prescribed by the law. Thus, prohibiting assignment of the access right the Ministry prohibited presence of the assigned access right in commerce, for which it had not powers. The Government of the Russian Federation, having in turn limited the range of persons, to whom the access right may be assigned, to certain parties to commerce, limited transferability of the access right, wherefore it should have used a procedure established by the law, but there is no such procedure and no relevant law. It is possible to remedy this situation, if the Natural Monopolies Law is amended in a proper way.



[1] Collection of the Legislative Acts of the Russian Federation, 1994, No. 5, Art. 397.

[2] Collection of the Legislative Acts of the Russian Federation, 1994, No. 10, Art. 1116 (invalid).

[3] Collection of the Legislative Acts of the Russian Federation, 1995, No. 2, Art. 162 (invalid).

[4] Collection of the Legislative Acts of the Russian Federation, 1995, No. 29, Art. 2815 (invalid).

[5] Logofet, D.D. The Right of Access to Main Oil Pipelines: Two Systems of Regulation // Oil, Gas and Law, 2006, No. 2, p. 35 (in Russian); Logofet, D.D. The Contract for Main Oil Pipeline Transportation of Oil: Thesis … Candidate of Legal Sciences. Moscow, 2005, pp. 66-67 (in Russian).

[6] Sitnikov, S.L. Proprietary and Liability Aspects of Main Pipeline Transportation of Oil: Thesis … Cand. Sc. (Law). Moscow, 2006, p. 125 (in Russian).

[7] Logofet, D.D. The Right of Access to Main Oil Pipelines…, p. 37 (in Russian).

[8] Collection of the Legislative Acts of the Russian Federation, 2011, No. 14, Art. 1943.

[9] Collection of the Legislative Acts of the Russian Federation, 1995, No. 34, Art. 3426.

[10] Collection of the Legislative Acts of the Russian Federation, 2001, No. 33, Part I, Art. 3429.

[11] From Wellhead to Market: Oil Pipeline Tariffs and Tariff Methodologies in Selected Energy Charter Member Countries. Energy Charter Secretariat, Brussels, 2007, p. 42.

[12] Logofet, D.D. The Right of Access to Main Oil Pipelines…, p. 37 (in Russian).

[13] Regulation “On the Procedure for Assignment of the Right of Access to the System of Main Oil Pipelines and Terminals in Seaports” (approved by the Ministry of Fuel and Energy on August 4, 1995) (in Russian) // The document wasn't published. Source – ConsultantPlus. The regulation is valid to the extent it complies with the applicable law.

[14] Seckel. Die Gestaltungsrechtedes bürgerlichen Rechts. Festschrift für Koch, 1903. S. 205.

[15] Schürnbrand Jan. Gestaltungsrechte als Verfügungsgegenstand // Archiv für die civilistische Praxis, Bd. 204, 2004. S. 179.

[16] Ibid.

[17] Palandt / Heinrichts, BGB, 2003, § 413, Rn. 5 ff. München Kommentar zum BGB, Band 2a, 4, 2003, § 413 Rn. 11, § 399, 18 f. Cited from: Schürnbrand Jan, ibid. S. 180.

[18] Schürnbrand Jan. Ibid. S. 180.

[19] NJW BGH (Neue Juristische Wochenschrift Bundesgerichtshof). 2003. S. 1858–1859.

[20] Arturo Allesandri R., Manuel Somarriva U., Antonio Vodanivic H. Tratado de Derecho Civil: Partes Preliminar y General. Santiago, Chile, 1998. P. 301.

[21] Albalagejo, Manuel, Derecho Civil. Introduccion y parte general. Barcelona, 2002. P. 273–274.

[22] Ibid.

[23] Agarkov, M.M. The Legal Nature of Rail Transportation // Law and Life, 1922, Book 2, pp. 1-12; Book 3, pp. 7-19 (in Russian).

[24] Agarkov, M.M. The Legal Nature of Rail Transportation // Bulletin of Civil Law, 2008, No. 4, pp. 171-172 (in Russian).

[25] The article of K.V. Korepanov “The Right to File an Action for Coercion into a Gas Transportation Contract” (Legal Energy Forum, 2014, No. 1, pp. 38-42, in Russian) states in detail, why this contract shall be treated as the public contract.

[26] The Resolution of the Presidium of the Supreme Court of the Russian Federation dd. January 10, 2001 // Bulletin of the Supreme Court of the Russian Federation, 2001, No. 7, p. 11 (in Russian).

[27] Ruling of the Supreme Court of the Russian Federation No. 5-B06-159 // Bulletin of the Supreme Court of the Russian Federation, 2007, No. 10 (in Russian).

[28] Ruling of the Supreme Court of the Russian Federation dd. July 7, 2009 No. 7-B09-1 // Bulletin of the Supreme Court of the Russian Federation, 2010, No. 10 (in Russian).

[29] Let’s put aside the general issue of applicability of the “creditor identity” category to legal entities and its specific cases in cession of the obligation to sign contracts from the preliminary contract or in reviewing assignability of the right of acceptance.

[30] Logofet, D.D. The Right of Access to Main Oil Pipelines..., p. 37 (in Russian).

[31] The same source.

[32] As stated in paragraph 2, cl. 2, Art. 129 of the Civil Code of the Russian Federation, types of objects of civil rights, which presence in commerce is prohibited, shall be explicitly specified in the law.

[33] Resolution of the Government of the Russian Federation dd. March 29, 2011 No. 218 // Collection of the Legislative Acts of the Russian Federation, April 4, 2011, No. 14, Art. 1943 (in Russian).

Bibliography:

  1. Agarkov, M.M. The Legal Nature of Rail Transportation / M.M. Agarkov // Bulletin of Civil Law. 2008. № 4. pp. 171-172 (in Russian).
  2. Agarkov, M.M. The Legal Nature of Rail Transportation / M.M. Agarkov // Law and Life, 1922. Book 2. pp. 1-12; Вook 3. pp. 7-19 (in Russian).
  3. Albalagejo, Manuel. Derecho Civil. Introduccion y parte general. Barcelona, 2002. P. 273 -274.
  4. Arturo Allesandri R., Manuel Somarriva U., Antonio Vodanivic H. Tratado de Derecho Civil: Partes Preliminar y General. Santiago, Chile. 1998. P. 301.
  5. Korepanov, K.V. The Right to File an Action for Coercion into a Gas Transportation Contract / K.V. Korepanov // Legal Energy Forum. 2014. № 1. pp. 38-42 (in Russian).
  6. Logofet, D.D. The Contract for Main Oil Pipeline Transportation of Oil: Thesis … Cand. Sc. (Law) / D.D. Logofet. Moscow, 2005. pp. 66-67 (in Russian).
  7. Logofet, D.D. The Right of Access to Main Oil Pipelines: Two Systems of Regulation / D.D. Logofet // Oil, Gas and Law, 2006. № 2. pp. 35, 37 (in Russian).
  8. Palandt / Heinrichts, BGB, 2003, § 413, Rn. 5 ff. München Kommentar zum BGB, Band 2a, 4, 2003. § 413 Rn. 11, § 399, 18 f.
  9. Schürnbrand Jan. Gestaltungsrechte als Verfügungsgegenstand // Archiv für die civilistische Praxis, Bd. 204, 2004. S. 179.
  10. Seckel. Die Gestaltungsrecht edes bürgerlichen Rechts. Festschrift für Koch, 1903. S. 205.
  11. Sitnikov, S.L. Proprietary and Liability Aspects of Main Pipeline Transportation of Oil: Thesis … Cand. Sc. (Law) / S.L. Sitnikov. Moscow, 2006, p. 125 (in Russian).