Vattenfall Seeks $6 Billion in Compensation for German Nuclear Phase-Out

Photo: Getty Images

Japan's Fukushima disaster in 2011 precipitated Germany’s "Atomausstieg" (nuclear exit), a program to close down all German nuclear plants by 2021. The eight oldest nuclear power stations were closed down immediately. Two of these power plants are owned by the Swedish state-owned energy giant Vattenfall, which also operates power plants in several other European countries.

In 2012 Vattenfall filed suit at the Washington-based International Center for Settlement of Investment Disputes (ICSID), demanding $6 billion in compensation.

The company, which reported a net loss of $2.5 billion for the third quarter of 2014, claims that the closure of the power stations caused substantial financial damage. The amount of compensation demanded remained undisclosed until the end of last October, when Germany's Federal Ministry for Economic Affairs and Energy (BMWi) revealed that the claim is for $6 billion in a letter answering the request (PDF) for more information by a member of the national parliament (Bundestag).

Vattenfall is not the only company seeking compensation. Two German utility companies, E.on and RWE are suing the government in German courts for $482 million and $294 million respectively.

A positive outcome to the claims looks somewhat promising because the legality of the "Atomaustieg" was flawed to begin with, argues Rupert Scholz. He is a lawyer and former defense minister, who wrote in an article in Cicero Online that the German constitution guarantees the peaceful use of nuclear energy. "The operators of nuclear power stations enjoy the right of property and also enjoy the right of the principle of free commercial activity," he writes. Because the Atomausstieg violated a basic principle of a constitutional democracy, it is not sustainable without compensating the concerned companies, he argues.

"The Atomausstieg means stopping operations, and this means that the nuclear power plants as property have been destroyed, and this can only happen with compensation, according to German law," says Scholz.

Hans-Georg Dederer, a professor of European and international economic law at the University of Pasau in Gemany, argues in Legal Tribune Online that, in fact, the cancellation of the operation licenses of the eight nuclear power stations constitutes a de-facto repossession, a concept absent in German law. Therefore a German court will have difficulty in ruling that the German government will have to compensate the German utility companies. The Swedish company has a better chance because the ICSID relies on international law, which includes  compensation in the case of a de facto repossession. Also Vattenfall will claim that the absence of compensation infringes on the concept of "fair and equitable treatment," which is part of international investment law, writes Dederer.

The ICSID ruling will be compulsory for the German government, according to BMWi spokesperson Adrian Toschev. "There is an international ICSID treaty and Germany is part of this treaty," says Toschev.

"In our opinion the claim isn't justified. The court in Washington will have to decide whether the international agreement forms a basis for their claim or not," concludes Toschev.

In an email message, Vattenfall spokesperson Sandra Kühberger gave the following statement: "We have emphasized that we respect the will of the majority of policymakers and the society to phase out nuclear energy in Germany. However, we do believe that a fair compensation is necessary."

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