German Atomic Energy Act Amendment Illegal - Case Comment BVerfG 1 BvR 1550/19
The German Federal Constitutional Court decided yesterday that the way in which compensation under the Atomic Energy Amendment Act of 10 July 2018 has been organized infringes the German constitution. The court was particulary concerned about implications of the Act towards the right to property, protected under article 14 German constutution. Moreover, the court ruled that due to formal issues the amendment never entered into force. This blogpost discusses the facts of the case, provides background information and provides an outlook on implications of the judgement.
The aftermath of the nuclear phase out in Germany is becoming a never-ending story. It was initiated nine years ago, but now it comes back to haunt the German government with a vengeance. The Swedish energy company Vattenfall initiated proceedings against the compensation-provisions of the Atomic Energy Act at international level (namely ICSID Case No. ARB/12/12, which has been the subject of an earlier post on this weblog), but also at national level in front of the German Federal Constitutional Court (Bundesverfassungsgericht). The latter now issued a judgement in favour of Vattenfall (BVerfG 1 BvR 1550/19).
The aftermath of the nuclear phase out in Germany is becoming a never-ending story. It was initiated nine years ago, but now it comes back to haunt the German government with a vengeance. The Swedish energy company Vattenfall initiated proceedings against the compensation-provisions of the Atomic Energy Act at international level (namely ICSID Case No. ARB/12/12, which has been the subject of an earlier post on this weblog), but also at national level in front of the German Federal Constitutional Court (Bundesverfassungsgericht). The latter now issued a judgement in favour of Vattenfall (BVerfG 1 BvR 1550/19).
1 BvR 2821/11,
However, the particular claim of Vattenfall concerning the closure of the Krümmel plant was deemed valid by the court. In essence the court agreed with Vattenfall that it had been expropriated because it was not allowed to make use of the so called residual electricity volume (Reststrommenge) that had been allocated for this particular plant.
The residual electricity volumes are a key-instrument of the Atomic Energy Act and the German nuclear phase out. In the original nuclear phase out law of 2002 the Government allocated these residual electricity volumes to each nuclear power plant in Germany so that the total output of the respective plant corresponds to an average
32 year lifetime. As electricity volumes can, in principle, be legally transferred between plants, it was not possible to forecast precise shutdown dates.
After the Fiúkushima incident the government decided to speed-up the phase out and set 2022 as an end-date. But for the nuclear power plant in Krümmel the government decided to prohibit Vattenfall from using the remaining allocated residual electricity volumes for this particular power plant.
In 2016 the German Federal Constitutional Court ruled that this amounted to expropriation without due compensation and urged the German parliament to amend the law. They highlighted three possible ways forward from which the legislator could choose: either prolongation of the opertaional lifetime of the plant or compensate Vattenfall in money or the legislator compelled other companies, namely Eon and EnBW to buy these non-usable residual electricity volumes from Vattenfall at a fair price.
The legislator opted for a mix of options 2 and 3 and launched the Atomic Energy Act Amendment of 10 July 2018. According to that Act, Vattenfall would receive monetary compensation from the government if it is not possible by the end of 2022 to sell the residual electricity volumes in question to Eon and EnBW. Vattenfall now successfully complained in front of the Federal Constitutional Court against this precise mechanism. In its ruling of 12 November 2020 the court made clear that this compensation-mechanism is so detrimental to Vattenfall that the earlier-criticized expropriation without due compensation would still persist.
Thje crucial point of criticism in yesterday`s judgement is the fact that only the German company Eon has reasonable ways of using these residual electricity volumes. With only one company being able to make use of this, it can be expected that Vattenfall would only be able to sell at a very low price to Eon, as they would, in essence, be a demand-monopolist for these residual electricity volumes. The point is that the law of 2018 obliges Vattenfall effectively to do `whatever it can´ to sell those volumes on the market (effectively to Eon). If Vattenfall is found to not have made these reasonable efforts of selling, they are not entitled to compensation after the end of 2022 in case the residual electricity volumes could not be sold. This, according to the judges, is `unacceptable´ to Vattenfall.
Besides the Krümmel-issue a second interesting point can be found in the judgement. The Federal Constitutional Court ruled that the Amendment of 2018 never entered into force. According to the Act was one of the conditions for entry into force that the European Commission would issue a legally-binding confirmation that the described compensation mechanism would not infringe EU competition law. The commission, however, only issued a general and non-binding letter on the compatibility of this compensation-mechanism with EU competition law. There was no notification pursuant to
Art. 108(3) of the Treaty on the Functioning of the European Union
(TFEU). The Directorate-General for Competition of the European
Commission stated that Commission services assume that a formal
application pursuant to Art. 108(3) TFEU is not required in relation to
the Atomic Energy Act Amendment. According to the German Federal Constitutional Court this letter may not be classified as binding communication.
So what does the future hold for nuclear power in Germany? Does this judgement mean that Germany`s nuclear phase out was illegal altogether? Not quite. The judges ruled that the German parliament needs to come up with a new compensation-mechanism `asap´- but they did not set a clear deadline for this to happen. It is not yet clear when this can happen, but what seems certain is that Vattenfall and theoir lawyers will look with eagle eyes at the third attempt of the legislator to get the compensation for their company right. The saga is set to continue for years to come.
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