Case study: Vattenfall v. Germany I
Vattenfall, a Swedish energy firm, launched a $1.9 billion investor-state claim against Germany in 2009 under the Energy Charter Treaty over permits delays for a coal-fired power plant in Hamburg. According to Vattenfall, delays of required government permits started when the state’s environmental ministry established “very clear requirements” for the plant, due to “the reports of the Intergovernmental Panel on Climate Change having alerted the public to the impending climate change.” Public opposition to the proposed plant focused on prospective carbon emissions and water pollution. Further delays, according to Vattenfall, occurred when the Green Party – which opposed the plant on environmental grounds – formed a coalition with the Christian Democrats after state elections in 2008. After Vattenfall litigated in domestic courts, the coalition government issued the permits to Vattenfall, but with additional requirements to protect the Elbe River.
Rather than comply with these requirements, Vattenfall launched its investor-state claim against Germany, arguing that Hamburg’s environmental rules amounted to an expropriation and a violation of Germany’s obligation to afford foreign investors “fair and equitable treatment.” In response, Michael Müller, then Germany’s deputy environment minister, stated, “It’s really unprecedented how we are being pilloried just for implementing German and European Union (EU) laws.” To avoid the uncertainty of a prospective investor-state tribunal ruling ordering payment of a massive amount of compensation, the German government reached a settlement with Vattenfall in 2010. The settlement obliged the Hamburg government to drop its additional environmental requirements and issue the contested permits required for the plant to proceed. The settlement also waived Vattenfall’s earlier commitments to mitigate the coal plant’s impact on the Elbe River. Any monetary payment extracted from German taxpayers in the settlement has not been disclosed. Vattenfall’s coal plant in Hamburg began operating in February 2014.