The new downstream petroleum law has been declared constitutional. The text essentially provides that the State can import hydrocarbons through an authorized entity. Once the downstream petroleum law is enacted, the State will be able to establish an entity it authorizes to import hydrocarbons.
Constitutional Compliance. The Constitutional Court (HCC) gives its unreserved approval to the enactment of the law establishing principles governing the exercise of certain downstream petroleum activities by an entity authorized by the State and amending certain provisions of the law on liberalization of the downstream petroleum sector.
The HCC thus validates the State's affirmed return to the operational side of the hydrocarbon sector. Implicitly, this law allows the State to directly import hydrocarbons through an entity it will authorize. Until now, it was difficult to access the content of this text adopted by the National Assembly on July 1st. However, the lines of the decision published Monday on the HCC website provide an overview of the law's sensitive points.
The structure of the reasoning reads like a response to reservations that may have been raised. No line of its decision indicates, however, that such an approach was undertaken with the Ambohidahy institution. It thus appears to anticipate potential criticism of the text.
On substance, the HCC states from the outset that this law "aims to define the fundamental principles governing certain downstream petroleum activities conducted by an entity authorized by the State, in order to guarantee final consumers and the country a resilient, sustainable, adequate, reliable, efficient and economical hydrocarbon supply system." The ultimate objective being "energy sovereignty."
Also according to the Ambohidahy institution, with this in mind, the law "organizes the activity of importing petroleum products entrusted to a specially authorized entity, other activities in the supply chain, the regime for access to essential infrastructure, planning of import operations, continuity of supply, prices and taxation, product quality, as well as related offenses and sanctions."
The HCC thus affirms that the law respects the principles of freedom of enterprise and investment security provided for in articles 37 and 38 of the Constitution. Article 37 establishes as a limit to freedom of enterprise "respect for the general interest, public order, morality and the environment."
Constitutional Jurisprudence
Reading its decision, the downstream petroleum law, in its article 14, provides for "a mechanism of mandatory priority supply from the authorized entity."
According to the Constitutional Court, this mechanism "neither aims nor has the effect of excluding other economic operators from the sector, but tends to ensure, in a context of structural instability in international hydrocarbon markets and insufficient territorial coverage noted in the law's explanatory memorandum, the security and continuity of national supply, which constitute grounds of general interest within the meaning of article 37 aforementioned."
Reading the HCC decision, articles 11 and 12 of the law guarantee "a right of free and non-discriminatory access to essential infrastructure" for the benefit of the entity authorized by the State. Article 11, in particular, "requires logistics operators and storage license holders to provide the authorized entity with storage capacity corresponding to its imported cargo or market share."
Logistics infrastructure in the hydrocarbon sector is indeed owned by private companies. This access right is exercised "through payment of passage fees set transparently and published, under the supervision of the Malagasy Hydrocarbon Office (OMH)." According to the Court's explanations, beyond the financial aspect, this mechanism is accompanied by a conciliation procedure and the possibility of legal recourse in case of dispute.
"Thus organized, this regulated access regime (...) does not excessively infringe on the freedom of enterprise and investment security of the logistics operators and storage license holders concerned," the HCC defends in its reasoning. It adds that payment of access fees to storage infrastructure means the law respects the right to property established by article 34 of the Constitution.
The Ambohidahy institution also emphasizes the law's compliance with the principle of equality before the law provided for in article 6 of the Constitution. Reading its decision, article 5 of the downstream petroleum law grants a "temporary exemption from license fees" to the entity authorized by the State. Its article 8 provides for a regulated regime.