GERMANY Law and Practice Contributed by: Patricia Nacimiento, Catrice Gayer, Lara Panosch and Theo Pauthonier, Herbert Smith Freehills Kramer LLP
Finally, it is worth noting that Germany is also a par- ty to the 1899 and 1907 Hague Conventions for the Pacific Settlement of International Disputes, which established the Permanent Court of Arbitration. 1.3 Prevalence of Investor–State Arbitration Until the 2010s, investor–state proceedings against Germany were essentially non-existent. The first investment case against Germany, Ashok Sancheti v Germany (2000) was terminated without an award being rendered. Germany did not face an ICSID arbi- tration until 2009 in Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v Germany (ICSID Case No ARB/09/6; Vattenfall I). Vattenfall II in 2012 was triggered by extraordinary policy shifts on nuclear power in the aftermath of the Fukushima nuclear acci- dent. In contrast, in the early 2020s, Germany faced an influx of ISDS claims – all in the energy sector, as foreign investors reacted to Germany’s ambitious energy transition policies ( Energiewende ) that include nuclear shutdown, coal phase-out, and renewables re-regulation (see details in 1.5 Major Arbitrations ). Despite the latter, the total count of cases against Ger- many stands at seven, which is small relative to the size of Germany’s economy and the number of BITs in force (see also 2.1 Bilateral and Multilateral Invest- ment Treaties ). In addition, the prevalence of ISDS in Germany in the role of respondent has been mitigated due to settlements. By contrast, German investors abroad have been active claimants in over 85 cases over the same peri- od. 1.4 Key Industries The key industry which has experienced ISDS in Ger- many in the role of respondent is the energy sector. The influx of cases is rooted in energy transition and policy changes. 1.5 Major Arbitrations Germany has been involved as respondent in seven publicly known cases, whereby all but one were com- menced under the ECT. • 2009 – Vattenfall AB, Vattenfall Europe AG, Vatten- fall Europe Generation AG v Germany (ICSID Case No ARB/09/6; Vattenfall I):
(a) Swedish utility Vattenfall and partners com- menced ICSID proceedings against Germany under the ECT over delays and environmental restrictions on a new coal-fired power plant (Moorburg in Hamburg). This marked the first major ICSID case against Germany. The principles debated were indirect expropriation, fair and equitable treatment, full protection and security, arbitrary, as well as unreasonable and/ or discriminatory measures. No breaches were found, and the dispute was settled in 2011. • 2012 – Vattenfall AB and others v Germany (ICSID Case No ARB/12/12; Vattenfall II): (a) in response to Germany’s post-Fukushima leg- islation to accelerate nuclear power phase-out, Vattenfall (as co-owner of two nuclear plants) filed a second ICSID claim under the ECT. The principles debated were indirect expropriation, fair and equitable treatment, umbrella clause and full protection and security, as well as arbitrary, unreasonable and/or discriminatory measures. In 2018, the German Constitutional Court ruled on the parallel constitutional com- plaint ( Verfassungsbeschwerde ) and ordered the government to compensate nuclear opera- tors. Germany subsequently reached a EUR2.4 billion settlement which concluded the arbitra- tion. • 2019 – Strabag SE, Erste Nordsee-Offshore Hold - ing GmbH and Zweite Nordsee-Offshore Holding GmbH v Germany (ICSID Case No ARB/19/29): (a) Strabag initiated ICSID proceedings against Germany under the ECT. The tribunal issued an award in favour of the investor in the amount of approximately EUR240 million – reportedly the first-ever investment arbitration award against Germany. While details remain confidential, the case concerned claims arising out of the government’s legislative changes of its renew- able energy regime, including for offshore wind energy production, which allegedly caused the claimants to abandon their offshore wind projects. • 2021 – Mainstream Renewable Power Ltd and oth- ers v Germany (ICSID Case No ARB/21/26): (a) similar to the Strabag case, this ICSID arbitra- tion under the ECT concerns claims arising from the government’s regulatory measures
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