The Court of Appeals has recently changed precedent on electricity loss-leakage fees, which have long been a controversial topic among electricity retailers and consumers.

In its decision dated November 1, 2016[1], the 3rd Civil Chamber of the Turkish Court of Appeals changed precedent and rendered that the loss-leakage fees imposed on consumers are lawful as per the provisions of the recent Law No. 6719 (“Amending Law”), which entered into force on June 17, 2016.

The loss-leakage fees have long been a controversial topic among electricity retailers and consumers. According to the established precedent of the Court of Appeals, until this recent decision, charging the loss-leakage fees to consumers was found contrary to the rule of law and equity principles protected under the Constitution.[2] However, the Court of Appeals has recently overturned its precedent and declared that charging loss-leakage fees to consumers is in compliance with the law in light of the recent Amending Law.

Highlights from the Amending Law and the Decision

The Amending Law was enacted in June 2016 to remove the ambiguity in relation to the loss-leakage fees and the conflicting decisions of the civil and administrative courts in this regard. The Amending Law restricted the jurisdiction of courts to a review from the perspective of compliance with the resolutions of the Energy Market Regulatory Authority only, and whereby validated such resolutions and in a sense brought them up to the level of statutory laws in the hierarchy of legislation. The Amending Law has also provided that its terms would be applicable to the pending lawsuits too. The recent decision of the Court of Appeals confirms that such new provisions of the Amending Law must be taken into consideration by the courts in rendering decisions in loss-leakage fee related disputes.

What is next?

In line with the recent decision of the Court of Appeals, the courts of first instance may have tendency to align their decisions with the Court of Appeals’ new decision, and dismiss the compensation claims of consumers from the electricity distribution companies. On the other hand, the destiny of the Amending Law remains uncertain as there are pending lawsuits before Constitutional Court against its relevant provisions. Although, as a general rule, decisions of the Constitutional Court do not operate retroactively, their application in the pending lawsuits constitutes an exception to this rule based on the so-called virtual retroactive effect principle adopted by the legal literature and court precedents. Therefore, if the Amending Law is annulled by the Constitutional Court and the Legislature does not enact a new law to remedy the situation, the Court of Appeals’ precedent may change once again for both the then-pending and the future lawsuits.

[1] 3rd Civil Chamber of the Court of Appeals, dated 1.11.2016, E.2015/17874, K.2016/12360.

[2] e.g., Assembly of Civil Chambers of the Court of Appeals, dated 21.5.2014, E.2013/7-454, K.2014/679; 3rd Civil Chamber of the Court of Appeals, dated 03.06.2014, E.2014/2058, K.2014/8734.

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