Nuclear Phase-Out put to the test

In May 2012 the Swedish energy company Vattenfall filed a request for arbitration against Germany at the International Centre for the Settlement of Investment Disputes (ICSID), housed at the World Bank in Washington, D.C., because of Germany’s decision to phase out nuclear energy.

Vattenfall relies on its rights under the Energy Charter Treaty, an international trade and investment agreement in the energy sector.

This treaty, like many international investment agreements, grants foreign investors the right to bypass the domestic courts of the host country and to directly file a complaint to an ad hoc international tribunal to challenge proposed government regulations. Vattenfall is expected to claim well over €700 million in compensation in response to the closure of the nuclear power plants Krümmel and Brunsbüttel.

This article sets out to assist interested members of the public and policy-makers to better understand this particular case and the investment law and policy it relies on. We will first provide the background on the conflict (including the first 2009–2011 Vattenfall v. Germany arbitration) and the central elements of international investment law that Vattenfall is likely to call into play.

We also provide a comparison with the domestic legal situation by looking into the pending review of the constitutionality of the nuclear phase-out. Finally, we briefly address a number of fundamental issues and needs for reform that come to the fore in the relationship between international investment protection law (including arbitration) and public policy-making.