The Federal Constitutional Court of Germany (FCC) on December 6 ruled that while the phase-out of nuclear energy (enacted in 2011) is in compliance with the constitution, Germany’s energy suppliers which operate nuclear power plants have to be compensated “reasonably”. Although the German legislator is primarily obliged by the court ruling to draw up new provisions by June 2018, energy suppliers have indicated their willingness to start negotiations with the Federal Government.

As a result of the Fukushima accident in March 2011, the legislator enacted fixed end dates for the operation of nuclear power plants in July 2011. It was an extreme reversal considering that the German government, only a few months before, put forth a modified energy policy in which nuclear energy should be prolonged as a “bridging technology” by an average of 12 years for each nuclear power plant. The law of 2010 increased electricity output allowances. Accordingly, energy suppliers challenged the withdrawn prolongation in their constitutional complaints against the recent amendment of the Atomic Energy Act (Atomgesetz). However, they did not object to the fundamental decision in favor of a phase-out of the nuclear energy taken in 2002 (Atomausstieg), nor were energy suppliers able to claim a concrete amount of compensation before the (FCC). Crucially, there was a gap between the guaranteed residual electricity volumes and the short-term operational lifetimes of the plants.

The Court Ruling

The court found initially that all complaints were admissible, including the one filed by , Sweden’s 100 % state-owned energy company. Usually, state-owned entities are prohibited from filing a claim at the FCC because such entities are representing the state itself. However, in the Vatenfall case, the court made an exception because Vattenfall was Swedish-owned. This is because the entity held by a foreign state does not dispose of any domestic power in Germany and due to the freedom of establishment protected under the EU law. It is now clear that at least European state owned entities can assert their fundamental rights before the FCC.

Within the scope of Art. 14 of the Basic Law (Grundgesetz) there is a general difference between an expropriation requiring compensation and a determination of the content and limits of property, which normally does not have to be compensated due to social obligation of property. The court found that, in the present case, the objected law of 2011 is a mere limitation of the property which only violates the constitution due to:

  • the deficit between the remaining operational lifetime and the guaranteed electricity production of 2002 (and not the increase of output allowances in 2010); and
  • the missing of provisions that compensate frustrated investments undertaken by energy suppliers after the law of 2010 regarding the increase of output allowances.

This is the result of the court’s differentiation between the laws enacted 2002 and 2010 with respect to the protection of legitimate expectation. The court argues that the law of 2002 originated from a wide consensus amongst the affected parties and was a compromise for the further limitations to the energy supplier’s property. On the other hand, the law of 2010 was politically motivated, and the period of time until its reversal in 2011 was too short to justify relying on the constancy, according to the court. Compared with public interests, such as life and health of the people, striking the prolongation of operational lifetimes was a proportional means to reduce the risks associated with the nuclear technology, even though no new finding as to its dangers could be derived from the accident in Fukushima. That is why, according to the court, the evaluation of a high-risk technology may depend on the political assessment and the public acceptance of the risks of damage.

Conclusion

The (FCC) found that only very little objections can be made towards the acceleration of the phase-out enacted in 2011. Energy suppliers stated that they do not bank upon short-term payments. That could mean that the considerations of the judgment will be leveraged in further discussion on the costs of nuclear decommissioning. The judgment may also have an impact on the ongoing arbitration between Vattenfall and Germany brought under the Energy Charter Treaty. In 2012 Vattenfall raised claims against Germany for compensation in an amount of approximately 4,6 billion Euro in an arbitration under the ICSID Convention (ICSID Case No. ARB/12/12). The claims were heard in October 2016.