In May 2025, the Court of Justice of the European Union (CJEU, or the Court) delivered its judgment in Case C-414/23, Metsä Fibre, referred to it by the Administrative Court of Helsinki (Helsingin hallinto-oikeus). The case concerned a dispute between a pulp and bioproducts company and the Energy Authority of Finland (Energiavirasto) over the treatment of greenhouse gas emission allowances under the EU Emissions Trading System (EU ETS).
The core issue was whether Metsä Fibre could reclaim emissions allowances it had surrendered under a legal framework that was later declared invalid. In its judgment, the Court found that previously invalidated parts of the EU ETS system cannot result in surrendered emissions allowances being reclaimed from the EU registry.
Background and facts
Between 2013 and 2017, Metsä Fibre, an undertaking, operated a bioproduct mill in Äänekoski, Finland. During this period, it reported and surrendered CO2 emissions allowances in accordance with Commission Regulation No 601/2012, which governed the monitoring and reporting of greenhouse gas emissions.
However, a later judgment of the Court in Schaefer Kalk (C-460/15), delivered in January 2017, invalidated part of that Commission Regulation, specifically the rule that counted CO2 transferred for the production of precipitated calcium carbonate (PCC) as emitted—even if it was not released into the atmosphere.
Following the Schaefer Kalk ruling of the Court, the Energy Authority of Finland retroactively revised Metsä Fibre’s emissions data, concluding that the undertaking had over-reported emissions, and surrendered 115,312 allowances unnecessarily. However, the Energy Authority of Finland refused to return the excess allowances, citing Article 40 of Commission Regulation No 389/2013 (the Union Registry Regulation), which governs the finality of transactions in the EU.
Metsä Fibre challenged this decision before the Administrative Court of Helsinki, which referred the matter to the CJEU for a preliminary ruling. The key legal questions were:
- Can surrendered allowances be returned if the legal basis for their surrender was later invalidated by the Court?
- Does Article 40 of the Union Registry Regulation prevent such a reversal?
- Does denying the return of allowances violate Article 17 of the Charter, which concerns right to property?
Judgment of the Court
In its judgment in May 2025, the Court ruled against Metsä Fibre, holding that the surrendered allowances could not be returned, even though the legal basis for their surrender had been invalidated. The judgment’s analysis covered several matters.
First, the Court emphasized that Article 40 of the Union Registry Regulation ensures the irreversibility of finalised transactions. Once allowances are surrendered, the transaction is considered final and cannot be undone—even if the underlying legal obligation is later found to be invalid.
Second, the Court stressed the importance of legal certainty and the integrity of the EU’s ETS. Allowing retroactive reversals of surrendered allowances would undermine the stability of the carbon market and create uncertainty for all parties.
Third, the Court rejected the argument that denying the return of emissions allowances violated Article 17 of the Charter. It held that the interference with property rights was justified, proportionate, and pursued a legitimate aim—namely, the orderly functioning of the EU ETS.
Analysis
The Metsä Fibre judgment of the Court, in essence, ensured there was no retroactive applicable of a prior judgment (Schaefer Kalk) whilst invalided part of an EU regulation. Thus, the undertaking was not automatically entitled to restitution. In its judgment, the Court distinguished between invalidity of a rule and the reversibility of administrative acts based on that rule.
Was the judgment of the Court in Metsä Fibre fair for undertakings, however?
The Court’s interpretation of Article 40 of the Union Registry Regulation sent a clear message: once emissions allowances are surrendered, the transaction is legally irreversible. The Court’s reasoning reflects its attempt to strike balance between legal certainty and fairness. On one hand, the ruling protects the integrity of the EU ETS by preventing a flood of retroactive claims. On the other, it arguably leaves companies like Metsä Fibre without a true feeling of fairness, for having complied with a rule that was later found invalid. This means that errors or injustices caused by invalid EU secondary law may not be rectifiable, which could be seen as a limitation on appropriate legal redress.
The judgment should be seen as a means for future validity challenges to EU legal acts to be brought sooner, rather than later. For undertakings, legal risk assessments must be fully undertaken when surrendering emissions allowances, for this judgment means that even if a provision of an EU legal acts appears valid at the time, its future invalidation may not entitle undertakings to any form of redress.
This could lead to a call for regulatory reform to provide clearer safeguards or compensation mechanisms for good faith actors. After all, Article 17 of the Charter on property rights here could not save Metsä Fibre in this instance. Some consideration might be given, as a matter of legislative amendment, to proposing some form compensation schemes (or close equivalent) for undertakings affected by invalidated provisions of specific parts of EU secondary law, as was the case here in Metsä Fibre.
Read the judgment
The judgment of the Court of Justice of the European Union in Case C-414/23, Metsä Fibre, delivered on 15 May 2025, can be read here.