French Constitutional Court upholds ban on hydraulic fracturing

• Energy and infrastructure - Gas and coal

18-10-2013

France enacted a law in 2011 (Law number 2011-835, dated 13 July 2011) prohibiting the exploration and exploitation of liquid and gaseous hydrocarbon mines by hydraulic fracturing (the “Hydraulic Fracturing Law”). Articles 1 and 3 of the Hydraulic Fracturing Law repeal exploration and exploitation licences where licensees declare the use, or anticipated use, of hydraulic fracturing (or ignore their obligation to declare this use).

Following adoption of the Hydraulic Fracturing Law, two exploration licences issued to US-based Schuepbach Energy were repealed. Schuepbach appealed the cancelation of its licenses before France’s highest administrative court (the “Conseil d’Etat”) on grounds that it is contrary to: (i) the principle of equality before the law; (ii) the freedom of enterprise; (iii) the right to property; and (iv) articles 5 and 6 of the Environment Charter. The Conseil d’Etat referred the matter to the Cour Constitutionnel (the French Constitutional Court). The Cour Constitutionnel ruled that the Hydraulic Fracturing Law complies with the French Constitution and dismissed the appeal.

Schuepbach contended that the prohibition of hydraulic fracturing would lead to unequal treatment. The Cour Constitutionnel, while accepting that there was unequal treatment, held that the difference in treatment is justified by the object of the Hydraulic Fracturing Law, i.e. prevention of the risk of hydraulic fracturing on the environment.

Schuepbach had further argued that the Hydraulic Fracturing Law violated the freedom of enterprise. The Cour Constitutionnel found that there was no violation of the freedom of enterprise because the Hydraulic Fracturing Law aims at protecting the environment, which is in public interest, and that the moratorium is not disproportionate.

With respect to the violation of property rights, the Cour Constitutionnel also ruled that the Hydraulic Fracturing Law does not violate property rights because it does not infringe on existing rights acquired under the licence. The Hydraulic Fracturing Law just establishes a new restriction. It was further noted that an exploration licence is not property and thus cannot be upheld as a property right of the licensee.

Schuepbach’s arguments based on articles 5 and 6 of the Environment Charter were not dealt with notably on the grounds of forum non conveniens, as they did not raise constitutional questions. This presumably leaves the door open for further contestation before the appropriate forum on the grounds of the Environment Charter.

This decision re-affirms the French Government’s position on hydraulic fracturing. It appears that hydraulic fracturing, absent the re-appeal of the Hydraulic Fracturing Law, will not be allowed in France for the foreseeable future.