Czech Constitutional Court backs state over solar clampdown

Highest Czech court upholds controversial government steps to clampdown on solar boom

HOT TOP|Energy & Green Biz
Chris Johnstone | 16.05.2012
Protecting property and investment rights did not mean preventing legal amendments the court said over the solar retro tax

The Czech Constitutional Court has ruled that the government was fully within its rights to slap a retroactive tax on solar power plant investors to curb a solar boom in the country.

The country’s highest court delivered its ruling Wednesday after being asked by a group of members of the upper house, the Senate, concerned that the retrospective action could set a dangerous precedent regarding property  and investment rights. They were also concerned that the hurried step had been taken by the government by means of fast-track emergency legislation.

The main feature of the retrospective government step to put a brake on the costly solar boom was a 26 percent tax on profits from solar plants which were connected to the overall power network in 2009 and 2010.

The court ruling argued that the government was fully within its rights to act in what it regarded as the public interest in an attempt to limit public costs and to react to the changed circumstances of the solar sector. It added that a 15-year guarantee that the initial investment costs of solar power investments would be recouped still applied albeit with the retroactive tax cutting returns sooner than the investors might have expected.

‘The principle of legal certainty is not possible to confound with the absolute impossibility of legal amendments.’

“The principle of legal certainty is not possible to confound with the absolute impossibility of legal amendments, that, among other things, depends on socio-economic changes and demands in line with regard to the stability of the state budget,” the court said in a news release.

It added that the effects of the government’s blanked action could nonetheless have had a serious impact on some solar investors, such as small producers who had taken out high interest bank loans on the basis of a planned fast return on the investment.

The boom was party sparked by a sharp fall in the price of solar panels while long-term guaranteed Czech prices for solar-produced power remained at previous high levels. This produced a stampede to set up solar power plants in the country before the government belatedly began to count the cost of the investment fever on electricity users and the government as it tried to cushion the effects on consumers.

The hurried and haphazard Czech move to counter the boom was widely criticized  in comparison with the systematic steps in other European countries to ease up renewable incentives once they seemed to be having an effect.

The court decision will not have any impact on arbitration proceedings which a group of foreign solar power investors are planning to launch against the Czech government in six or seven weeks related to its hurried clampdown on solar incentives. 

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