Has the good faith presumption become obsolete under EU law?

An exception from the non-retroactivity principle – EU precedent with potentially dangerous consequences

Abstract

Regulation (EU) 2026/261, introducing a binding phase out of Russian natural gas and LNG imports, constitutes a turning point in EU sanctions and energy law. Beyond its geopolitical objectives, the regulation departs in significant respects from foundational general principles of EU law, notably the presumption of good faith, legal certainty and non retroactivity. By excluding from transitional protection all supply contracts concluded or modified between the publication of the Commission proposal and the regulation’s entry into force, the measure establishes a de facto presumption of circumvention without case by case assessment. This contribution argues that Regulation 2026/261 reflects a broader shift towards deterrence based legislative techniques that sit uneasily with settled Court of Justice jurisprudence on abuse of rights and legitimate expectations. The article situates the regulation within the evolution of EU sanctions law and examines its implications for the coherence of the EU legal order.

Executive summary

• Legal framework and context – disruptions of gas supply in the current geopolitical context and the disruptive consequences of the regulation for  the EU legal order.

-First deviation from an EU principle: the principle of legal certainty principle and the need to prove bad faith and intention to circumvent the law.

-Second deviation from an EU principle of law: non-retroactivity.

-Third deviation from an EU law principle: harm is presumed, deviating from the general principle stated in the Damages Directive that harm must be proven and is only presumed in cases of cartel infringement.

-The three deviations above mentioned also constitute significant departures from national legal and constitutional principles.

-The question of the precedence of EU regulations over national fundamental and constitutional principles.

-Practical remarks concerning the authorities empowered to implement the regulation.

-Re-labelling Russian gas and other loopholes in the regulation.

• Final remarks.

Short version analysis

The adoption of Regulation (EU) 2026/261 marks the first instance in which the European Union has enacted a comprehensive and directly applicable ban on imports of Russian natural gas and liquefied natural gas. While the political, security and moral rationale underpinning the measure is widely shared, its legal architecture raises fundamental questions concerning the continued vitality of general principles of EU law under conditions of geopolitical emergency.

Most strikingly, the regulation challenges the traditional presumption that economic operators act in good faith and may rely on the law as it stands at the time they organise their economic activities. In doing so, it places acute strain on the principles of legal certainty and legitimate expectations, which the Court of Justice has consistently characterised as essential corollaries of the rule of law in the Union legal order.

 The “suspicious period” and legislative presumptions of circumvention

A defining innovation of Regulation 2026/261 lies in its treatment of contracts concluded or amended during the period between 17 June 2025 – when the Commission published its legislative proposal – and the regulation’s entry into force. All such contracts are excluded ipso iure from the transitional exemptions otherwise available to legacy gas supply agreements and are subject to immediate termination once the prohibition becomes applicable.

The regulation justifies this approach on the assumption that market participants could have used the interim period to circumvent the forthcoming ban by concluding new contracts or expanding existing ones. This assumption, however, operates not as a rebuttable inference but as a legislative presumption attached to the mere timing of the transaction.

This approach marks a clear departure from established Court of Justice jurisprudence on abuse of rights and circumvention. The Court has consistently required a two‑fold test: an objective element, consisting in the frustration of the purpose of EU rules and a subjective element, namely the intention to obtain an undue advantage through artificial arrangements. Crucially, this assessment must be conducted on a case‑by‑case basis, taking into account the specific circumstances of the transaction concerned.

By contrast, Regulation 2026/261 replaces evidentiary assessment with temporal categorisation. The mere fact that a contract was concluded in the “suspicious period” suffices to deprive it of legal protection, irrespective of its commercial substance or economic rationale.

Legal certainty, legitimate expectations and de facto retroactivity

The exclusion of transitional protection for lawfully concluded contracts gives rise to effects that are retroactive in substance, if not in form. Economic operators are deprived of legal positions acquired in full compliance with the regulatory framework applicable at the time of conclusion, solely on the basis that future legislative change was politically foreseeable.

While EU law does not impose an absolute prohibition on retroactive administrative regulation, the Court of Justice has repeatedly held that such measures must respect the principles of legal certainty and legitimate expectations. Departures from non‑retroactivity require clear justification and must strike a fair balance between public interest objectives and the reliance interests of affected parties.

Regulation 2026/261 adopts a markedly different logic. It treats the foreseeability of political intent as sufficient to neutralise reliance interests, even though the Commission proposal had not yet crystallised into binding law and remained subject to political negotiation. In this respect, the regulation comes dangerously close to transforming regulatory adjustment into retrospective sanctioning.

Presumed harm and punitive sanctions

The Regulation’s approach to sanctions reinforces this impression. Infringements are subject to exceptionally severe administrative fines, calculated on the basis of global turnover or estimated transaction value, without any requirement to establish concrete harm. Unlike the rebuttable presumption of harm recognised in cartel damages litigation, the Regulation appears to operate on the basis that guilt and harm are presumed simultaneously, leaving little room for effective contestation.

The cumulative effect of presumed circumvention, presumed harm and deterrent‑level penalties suggests a deliberate policy choice to privilege effectiveness and dissuasion over doctrinal coherence. While such an approach may be politically understandable in the context of sanctions enforcement, it sits uneasily with the general principles traditionally governing regulatory law.

 Regulation 2026/261 in the evolution of EU sanctions law

Regulation 2026/261 must be understood within the broader evolution of EU sanctions law, which has increasingly relied on autonomous, directly applicable and economically intrusive instruments. The Regulation illustrates how sanctions logic has spilled over into areas traditionally governed by internal market principles, thereby blurring the boundaries between regulatory law and punitive measures.

This development raises a broader constitutional question: whether general principles such as good faith, legal certainty and legitimate expectations continue to operate with full force in highly politicised and security‑driven regulatory contexts or whether they are being recalibrated in favour of preventive effectiveness.

Judicial review by the Court of Justice will be central in determining the limits of this evolution. Although the EU legislature enjoys a wide margin of discretion in matters touching upon foreign policy and security, that discretion has never been absolute.

Conclusion

Regulation (EU) 2026/261 represents a watershed in EU energy and sanctions law. By institutionalising presumptions of bad faith and circumvention during a pre‑entry‑into‑force period, it significantly weakens the traditional safeguards of legal certainty and legitimate expectations. While its strategic objectives are undoubtedly legitimate, the legal techniques employed risk setting a precedent capable of extending well beyond the specific context of Russian gas imports.

For the coherence and credibility of the EU legal order, it remains essential that deterrence‑oriented regulation be reconciled with the general principles that constitute the Union’s constitutional foundation. Whether the presumption of good faith can survive this recalibration remains an open and pressing question.

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