Questions and answers - Vattenfall – ICSID

The lawsuit

The ICSID

The lawsuit

1. Why are you filing your claim at an international court of arbitration and not before German courts?
The German nuclear operating companies of Vattenfall have filed a constitutional complaint against the 13th amendment of the Atomic Energy Act with the German Federal Constitutional Court. It has been, however, very questionable whether these companies can refer to the Constitutional Rights in Germany at all, since they are fully owned by the Swedish state. So far, the German Federal Constitutional Court has regarded similar complaints very critically. In its decision from 06.12.2016, the Constitutional Court has made an exception for the first time.

2. Why is it then that you did not await the German court's decision, but already filed your claim with the ICSID before going to the German court?
Against this background (please see question 1), it was not an option for Vattenfall to await the multi-year procedure at the German Federal Constitutional Court before appealing to ICSID. Therefore, we have also turned to the court which is intended for in Energy Charter Treaty. This trade agreement in the energy sector (the Energy Charter Treaty) has been signed by Germany and Sweden together with fifty other states and the EU and contains clauses aiming to ensure that countries respect fundamental legal principles.

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3. What do you think about the criticism that arbitral tribunals might overturn democratic decisions?
The approval of the Energy Charter and Arbitration Treaty was a democratic decision of both German chambers. The dispute resolution mechanisms set out in the Charter give companies the security of being able to make larger investments without having to bear political risks. This prevents in no way democratic decisions. Of course, Germany may decide to reorient its energy policy, but foreign investors should not have to pay the price for such a decision and lose money if the government's decision is arbitrary and unfair.

4. Why do you obstruct, or put in question, the German democratic decision to phase out nuclear power?
Vattenfall is not questioning the decision to phase out nuclear power in Germany. But we insist on receiving compensation for the financial loss suffered by the company. 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.

5. Do you also seek compensation for necessary security measures – in other words, do you want the German taxpayers to pay you for having been unsafe in the first place?
No. We will not seek compensation for security measures which would have been required anyway. These investments are being paid by us.

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6. Do you think it is fair to demand a compensation from German taxpayers?
The German Federal Constitutional Court has decided in its ruling on 06.12.2016, that the nuclear power plant Krümmel has been discriminated. The Court has called on the legislator to remedy the situation. So far, the German Federal government has not responded to the verdict.

7. Why do you allege that you were treated differently or worse than your German competitors when they too had to close plants?
Vattenfall is worse off in two respects: Its nuclear power plant (NPP) Krümmel has been treated differently to those of our competitors. In 2010, the legislator assigned Krümmel to the "younger" plants as it has been taken into operation in 1984. A few months later (in the 13th amendment of the Atomic Energy Act) in 2011, Krümmel was included among the group of "older" power plants, i.e, those plants that started operation by or before 1980. For example, the NPP Grafenrheinfeld, which has started power generation just approx. two years before Krümmel, kept its operating license.
With regard to the production volumes that have been agreed on with the German government in 2002, Vattenfall's situation is also unique as Vattenfall is the only operator in Germany, that has no running power plants anymore where the production could be transferred to.

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8. You claim that E.ON was compensated for the closure of the Barsebäck plant in Sweden. Why do you think you can compare the two cases, and did the German government respond to this comparison?
In both cases a political decision triggered the closure of a nuclear power plant well ahead of the end of its lifetime. But when in 1997 the Swedish government decided to decommission the nuclear power plant Barsebäck, Sweden compensated the German owners who were affected because the decommissioning of Barsebäck came ahead of time. The German government has not sought to compensate Vattenfall in a similar way.

9. Why are you hindering or questioning the democratic German decision to phase out nuclear energy?
Vattenfall does not question the political and social decision to phase out nuclear energy in Germany. However, we have always emphasized that we expect a fair compensation for the financial loss incurred. If the company is harmed and is entitled to compensation, it has to pursue such a claim. This has nothing to do with the attitude towards nuclear energy or the phase-out of nuclear energy.

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10. Couldn't you make a settlement? Why didn't you negotiate rather than sue?
A settlement was possible at any time. We have not receive any signal from the German Government with regard to a possible settlement.

11. Which law firms work for you on this case?
Luther Rechtsanwaltsgesellschaft (Germany) and Mannheimer Swartling AB (Sweden)

12. Did you inform the Swedish government on your plans to sue beforehand?
As the Swedish government is represented in Vattenfall's Board, the Swedish government has been involved.

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The ICSID

13. What is the ICSID?
The ICSID (International Centre for the Settlement of Investment Disputes), a part of the World Bank in Washington, DC, is the worldwide leading institution for settling international investment disputes. Established by international treaty in 1965 (the "ICSID Convention"), the ICSID offers an independent and neutral forum for investors and States to have investment disputes settled by experienced and impartial professionals. It is designated as a dispute-resolution forum by numerous international treaties and trade agreements. 153 states worldwide have signed and ratified the ICSID Convention.

14. How does an ICSID arbitration work?
Similar to a court proceeding, an ICSID arbitration involves (i) a request for arbitration that describes the claim, (ii) preliminary sessions where objections can be heard and procedural issues addressed; (iii) written briefs and submissions of evidence and argument by the parties, (iv) an oral hearing at which the parties present witnesses and experts, and (v) a written decision, or award, by the tribunal. The ICSID generally describes the process here on its website.

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15. Who decides the case? How are the arbitrators selected?
The case is decided by a tribunal of arbitrators. There generally are three arbitrators – one chosen by each party and a president of the tribunal chosen by agreement of the parties. The majority of the arbitrators must be from counties other than the States involved in the dispute. The ICSID maintains a Panel of Arbitrators from which arbitrators typically are selected, though the parties may select any qualified professional as an arbitrator. Arbitrators must be experienced professionals of "high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment."
In this case, the arbitrators are President Professor Albert Jan van den Berg of the Netherlands (appointed by agreement of the parties), Professor Vaughan Lowe of Great Britain (appointed by Germany), and The Honorable Charles N. Brower of the United States (appointed by Vattenfall).

16. Who participates in the hearings?
The Tribunal, the lawyers of the parties, representatives of the parties, witnesses and experts.

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17. What law governs the case?
Unless the parties agree otherwise, by the ICSID convention, the procedural rules published by the ICSID and the Energy Charter Treaty (which due to ratification of the ICSID Convention and the Energy Charter Treaty are also part of German national law). German national law is relevant as a factual background for the case. The very subject-matter of the case is whether German law, specifically the 13th amendment to the Atomic Energy Act, breaches Germany's obligations under the Atomic Energy Act.

18. What language is used?
The parties may agree to use one or two languages. Here, the case is being conducted in English, although certain witnesses and experts may testify in German, with English translation.

19. What filings are involved?
The party making the claim first files a request for arbitration, which sets out the basis for bringing the claim in the ICSID, and any supporting documentation. The main written filings consist of a Memorial (brief) by the claimant, a Counter-Memorial by the other party, a Reply by the claimant, and a Rejoinder by the other party. Each brief sets out the relevant facts and legal arguments and is accompanied by submissions of evidence.

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20. What is involved in the oral hearing?
Much like a courtroom trial, the parties, represented by counsel, present opening statements, call witnesses and experts to testify, answer questions from the tribunal, and may make closing statements. The tribunal, in consultation with the parties, determines whether the hearing can be attended or observed by other persons, besides the parties, along with any arrangements necessary to protect confidential or proprietary information. In some cases the ICSID hearings had been even broadcasted on the internet, different from cases in national courts. The ICSID keeps audio recordings and written transcripts of the hearing.

21. When and how is a decision reached?
The tribunal issues its written decision, or award, within 120-180 days after the parties have presented their cases and the proceeding was closed by the Tribunal. The award is by majority vote of the tribunal, and individual arbitrators may attach separate statements agreeing with or dissenting from all or part of the decision. The award must address every question submitted and give the reasons for the decision. The ICSID publishes excerpts of the tribunal's legal reasoning, and, with the parties consent, it may publish the entire award.

22. What happens after the tribunal issues its award?
The tribunal's award is binding and has the same effect as a final judgment of a German national as stipulated under international and under relevant German law. Under certain circumstances, the parties may ask ICSID to revise or annul the award or to interpret any portion of the award that may be ambiguous or disputed.

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23. Why will it take so long to come to an arbitration ruling?
There are special requirements for such a proceeding. Compared with a lawsuit in Germany the proceeding time at ICSID does not take longer.

24. What is the significance of the Achmea judgment of the European Court of Justice?
In its Achmea judgment of 6 March 2018 (Az: C-284/16), the European Court of Justice ruled that the investor-state arbitration clause in the 1991 Bilateral Investment Agreement between the Netherlands and Slovakia violated EU law. Unlike the Achmea case, the Vattenfall procedure is based on the Multilateral Energy Charter Treaty, in which the EU itself participates. The EU even made a significant contribution to the establishment of the Energy Charter Treaty and the upstream negotiations. Unlike the Achmea case, the right of this treaty and other relevant international law, but not EU law, applies exclusively to investment disputes under the Energy Charter Treaty. The Achmea judgment therefore has no effect on the Vattenfall AB case against the Federal Republic of Germany (ICSID Case No ARB / 12/12).

Last updated: 2018-04-19 11:59