News item | 2014-12-09 | 14:56 PM

Why Vattenfall is taking Germany to court

A few years from now at the earliest, the International Centre for the Settlement of Investment Disputes in Washington will decide on Vattenfall's demand for compensation from the German state for the loss of revenue from its German nuclear power plants.

"We are not questioning the decision to phase out nuclear power in Germany. But Vattenfall insists on being compensated for the financial loss resulting from this decision," says Vattenfall's General Counsel Anne Gynnerstedt.

Shortly after the Fukushima nuclear incident in Japan on 11 March 2011, Germany decided to phase out all its nuclear power plants by 2022. The decision led to the immediate closure of Vattenfall's power plants at Krümmel and Brunsbüttel.

A few months later, Vattenfall filed a case against the German state with the International Centre for Settlement of Investment Disputes (ICSID) in Washington.

"Vattenfall saw no other way of obtaining compensation," points out Vattenfall's General Counsel Anne Gynnerstedt.

A similar situation occurred in Sweden in 1997 when the Swedish government decided to decommission the nuclear power plant Barsebäck. Sweden then compensated the German owners who were affected because the decommissioning of Barsebäck came ahead of time.

"The German government has not similarly sought to compensate Vattenfall. The foreign-owned nuclear power which was closed due to the Swedish decision was considerably older than several of Vattenfall's reactors shut down in Germany."

Why was the decision taken to file a case against Germany?
"Vattenfall is not questioning the decision to phase out nuclear power in Germany. But we do insist on receiving compensation for the financial loss suffered by the company. There was simply no other way than to indict Germany.

Why should a company like Vattenfall indict a state for the consequences of a democratically taken decision?
There is a trade agreement in the energy sector – the Energy Charter Treaty – which has been signed by Germany and Sweden together with over fifty other states and the EU. The Charter contains clauses aiming to ensure that countries respect fundamental legal principles.

The dispute settlement mechanisms laid down in the Charter give companies the security to make major investments without having to take political risks. This in no way prevents democratic decisions. Germany can naturally decide to reorient its energy policy, but foreign investors should not have to pay the price for such a decision and lose money. That in itself would be in conflict with democratic principles."

"If there were no way to receive compensation, then no one could be expected to make major long-term investments over national borders, which would be counter-productive."

The Energy Charter Treaty's website shows that 59 lawsuits are currently ongoing between companies and national states.

Confidential information
Anne Gynnerstedt expects the ICSID in Washington to make its decision within a few years.

Why can't Vattenfall comment on the amount of the compensation it is claiming from Germany?
"That is confidential information according to the rules of the arbitration procedure and I cannot make any comment."

Protest lists
Vattenfall's decision to take on Germany has evoked a surge of interest. Thus protest lists are being circulated on the social media which urge Vattenfall to relinquish its claim for compensation.

Where's the ethics of a profit-driven company like Vattenfall claiming compensation from a state?
"Investments in the energy sector always involve large sums of money, and there is a need for long-term planning. That's also the reason why there is a special trade charter precisely in this sector. If a foreign company has made major investments in a high-resource industry such as nuclear power under the precondition that this type of energy will be part of the local energy system, then the company should not have to assume the consequences of a political change.

The foreign state that makes the decision and controls the further course of events should take the consequences. That was also the understanding of the German state when it signed the Trade Charter."

"If we suffer a major loss, and are entitled to compensation, then it would be irresponsible of us not to try and obtain it. That has nothing to do with whatever general feeling one may have about nuclear power."

With renewables into the future
In this debate, it is asserted that Vattenfall's move is a direct result of the planned free trade agreement TTIP (Transatlantic Trade and Investment Partnership) between the EU and the USA.

"That's not true. Our lawsuit forms part of the Energy Charter Treaty, as we had also pointed out earlier," says Anne Gynnerstedt.

It has also been claimed that Vattenfall is against the production of renewable energy and that's why it's indicting Germany?
"That claim falls due to its own lack of logic. Renewable energy is Vattenfall's future core activity, not least in Germany. Vattenfall will be investing SEK 11 billion in wind power projects over the next four years. Our offshore wind farm DanTysk in the North Sea recently began supplying power to the grid, and next year we shall start building the Sandbank wind farm, which is also located in the German part of the North Sea."

International Centre for Settlement of Investment Disputes

Read more about the Energy Charter Treaty