Commercial/civil law – substantive

Rules and industry standards

Describe any industry-standard form contracts used in the energy sector in your jurisdiction.

In wholesale trading, the European Federation of Energy Traders (EFET) standard reflects industry practice. Supplying household customers is governed either by directly applicable ordinances or by freely negotiated contracts, which, however, have to comply with Germany’s strict law on standard terms and conditions.

As regards access to the regulated electricity and gas networks, specific provisions exist that predefine the content of such contracts. In the electricity sector, the Federal Network Agency defined model contracts for network access. Electricity network operators are obliged to apply the model contracts to all their customers (ie, replace all existing contracts accordingly).

In the gas sector, a multilateral agreement between the gas network operators exists - the Cooperation Agreement - that contains provisions on the organisation of network access and cooperation between the gas network operators.

What rules govern contractual interpretation in (non-consumer) contracts in general? Do these rules apply to energy contracts?

As a general rule, the interpretation of contracts under German law starts with the wording of the contract. The aim is to determine the will of the parties, as it can be discerned by an objective third party. If the interpretation of the wording yields no clear result, surrounding circumstances are also taken into consideration (German Civil Code sections 133, 157).

Further, courts can review standard terms and conditions for ‘appropriateness’ even in B2B-contracts. ‘Inappropriate’ clauses are invalid. Furthermore, it is a general rule that, in case of doubts, standard terms and conditions are interpreted against the entity that supplied them. These rules also apply to energy contracts.

Describe any commonly recognised industry standards for establishing liability.

Generally, liability requires at least negligence on the part of the defendant. There are three forms of negligence corresponding to different degrees of carelessness: gross negligence, ordinary negligence and slight negligence. It is possible to agree on different standards of liability in a contract. However, if the limitation of liability is part of the standard terms and conditions, it is subject to the legal rules set out in sections 305 to 310 of the German Civil Code. According to the latter, neither liability for wilful default nor liability for grossly negligent actions can be excluded in contracts. Likewise it is not possible to limit liability for injuries to life, body or health of a person. Slightly less strict rules apply to B2B contracts.

There are several industry standards for the different kinds of contracts in the energy sector such as grid connection agreements and energy supply agreements. For example, the EFET sample contracts are commonly used. Pursuant to section 12.2 ‘General Agreement Concerning the Delivery and Acceptance of Electricity’, a party is not liable for any damages except where such damages are due to gross negligence, wilful default or fraud of the party, its employees, officers, contractors or agents.

Moreover, there are specific regulations that contain strict liability, such as, for example section 26 of the Atomic Energy Act, which provides for a combination of strict liability and fault-based liability.

Performance mitigation

Are concepts of force majeure, commercial impracticability or frustration, or other concepts that would excuse performance during periods of commodity price or supply volatility, recognised in your jurisdiction?

‘Economic impossibility’ can excuse performance for economic reasons (section 275 of the German Civil Code). However, the hurdles for its application are very high and will not be fulfilled in most cases of commodity price or supply volatility.

In addition, German law recognises the concept of ‘interference with the basis of the transaction’ (section 313 of the German Civil Code). While this concept does not excuse performance per se, it primarily allows a party to demand the adaptation of a contract if:

  • circumstances, which became the basis of a contract, have significantly changed since the contract was entered into;
  • the parties would not have entered into the contract or would have entered into it with different contents if they had foreseen this change; and
  • one party cannot reasonably be expected to uphold the contract without adaptation.

The adaptation is carried out at the discretion of the court. In the adaptation, all the circumstances of the specific case, in particular the contractual or statutory distribution of risk, are to be taken into account. If contract adaptation is impossible or unreasonable, the contract can be terminated.

To the extent applicable, article 79 of the Vienna Convention on the International Sale of Goods also recognises that parties are not liable for a failure to perform any of their obligations if they prove that the failure was due to an impediment beyond their control and that they could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.

Nuisance

What are the rules on claims of nuisance to obstruct energy development? May operators be subject to nuisance and negligence claims from third parties?

Generally, pursuant to section 1004 of the German Civil Code, the owner is entitled to file an action for injunction if a third party interferes with its ownership. Hence, operators may be subject to such claims.

Pursuant to section 64 of the Federal Nature Conservation Act, nature conservation organisations are entitled to collective action against certain decisions of environmental authorities, for example, regarding projects that affect the environment, such as the erection of a power plant.

Liability and limitations

How may parties limit remedies by agreement?

Parties to an individually agreed civil law contract can agree that a simple form of negligence will not entitle claims to damages. However, a party cannot be released in advance from liability for wilful conduct (section 276, paragraph 3 of the German Civil Code). The parties can also agree on lump-sum claims of damages. This would be understood as a prior estimation of the amount of damages, so as to reverse the burden of proof. The entity causing the damage cannot be prevented from proving that the actual damage is less than what was agreed beforehand.

In standard terms and conditions, lump-sum claims for damages cannot be agreed to the extent that they either exceed (i) exceed the damage expected under normal circumstances or (ii), the customarily occurring decrease in value. The same applies or if the other party to the contract is not expressly permitted to show that damage or decrease in value has either not occurred or is substantially less than the lump sum (section 309, No. 5 of the German Civil Code). Similarly, in standard consumer contracts, liability for gross negligence cannot be excluded.

Is strict liability applicable for damage resulting from any activities in the energy sector?

The possessor of the nuclear facility is bound to damages and compensation, if nuclear fission or nuclear radiation result in injury, death or property damage (section 26 of the Atomic Energy Act). The obligation to indemnify is excluded if the damage is inevitable and if there is no defect of the protection device.

Offshore windfarm operators can demand compensation from the responsible transmission system operator (TSO) for delays in construction or interruption to operation of the offshore connection systems irrespective of whether the TSO is responsible for the interruption of the offshore connection system (section 17e of the Energy Industry Act (EnWG)).

Generally, the compensation amount is limited to 90 per cent of the lost feed-in remuneration as of day 11 of the system interruption. If the TSO acts wilfully, the compensation amounts to 100 per cent as of day one. However, under certain conditions, the responsible TSO is entitled to pass on the compensation payments for delays in construction or interruptions to the operation of offshore connection systems to the other TSOs.