Swedish Company Uses Corporate Sovereignty Clause To Demand 4.7 Billion Euros From German Public

Legal Issues

from the are-you-sure-that's-enough? dept

A couple of months ago we mentioned the long-running legal battle involving the Swedish energy company, Vattenfall, which is suing Germany using corporate sovereignty provisions in the Energy Charter Treaty after the German state decided to phase out nuclear power stations. The rumored figure we mentioned then was the already-generous €3.7 billion; but it has just been revealed that Vattenfall is actually demanding even more — €4.7 billion, to be precise. We know this is the real figure, because it was mentioned by Germany’s Minister of the Economy, Sigmar Gabriel (original in German.)

This fact may help to explain persistent reports that Germany will not agree to the inclusion of an investor-state dispute settlement (ISDS) chapter in either TAFTA/TTIP or CETA (the Canada-EU trade agreement). Germany is already experiencing first-hand the dangers of such corporate sovereignty provisions, and clearly wants to avoid suffering any more on this front.

The latest information, reported by the German news magazine Der Spiegel, points out that two other energy companies, RWE and E.on, are unable to sue in the same way as Vattenfall, because they are German companies, and the ISDS option is only available to foreign investors. This underlines the fact that, far from creating a level playing-field, corporate sovereignty is biased against local companies. For this reason, RWE and E.on are also trying to sue in Germany’s national courts in order to obtain compensation, as Vattenfall is doing with the ISDS tribunals; whether they can depends on a ruling from Germany’s constitutional court, due early next year. Interestingly, Vattenfall is also suing the German government through these courts — which shows how ISDS gives foreign investors extra ways of claiming compensation.

Finally, the Der Spiegel article points out that the original estimate of the potential costs to the German government (and thus to the German taxpayer, who has to pick up the bill) from the action in the national courts, which were put at between €15 billion to €20 billion, are probably too high. That’s because the price offered for supplying electricity has now dropped, bringing down potential profits too. That demonstrates the danger of granting corporate sovereignty tribunals unchecked power to make awards in favor of companies based purely on the latter’s probably exaggerated claims about uncertain “losses” far into the future.

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Filed Under: corporate sovereignty, germany, investments, isds, lawsuits, tafta, ttip
Companies: vattenfall