Shahla Ali on Environmental Disaster-Related Disputes and the UNCITRAL Rules on Transparency

"Prospects of Utilizing Investor-State Mediation and UNCITRAL Rules on Transparency for Polycentric Environmental Disaster-Related Disputes: The Case of Vattenfall v Germany"

Shahla Ali
Comparative Law Journal of the Pacific
Special Issue, Vol. XIX, 2015

Under the backdrop of the Japanese Fukushima nuclear disaster, Chancellor Angela Merkel’s government decided to phase out rapidly nuclear energy in Germany with an amendment to the “Atomic Energy Act”.

     Previously, Merkel had decided to extend the usage of the nuclear reactors past their due phase-out date. Following Fukushima, such a decision was rendered politically unpalatable and untenable

      In 2009, Vattenfall arbitrated against the German government at the International Center for Settlement of Investment Disputes excessive imposition of water quality standards for a coal power plant, which rendered Vattenfall’s investment project “unviable”. The claim against Germany was about €1.4BN, but it was settled in 2011, with Germany agreeing to a more lenient water quality standard in favor of Vattenfall.

      In 2012, Vattenfall, a Swedish nuclear plant operator, sought compensation from the rapid exit from nuclear energy in Germany – “fair compensation” associated with the rapid phase-out of their two nuclear plants. Press reports in late 2011 put Vattenfall’s lost investments in nuclear power plants at €700MM. In 2012, the company estimated the damages from the nuclear phase-out actions at €1.18BN. However, the exact amount of Vattenfall’s compensation claim against Germany is unknown. 

      Vattenfall initiated arbitration proceedings by filing a Request for Arbitration at the International Center for Settlement of Investment Disputes in Washington D.C. Vattenfall was attempting to claim “compensation for the phasing out of nuclear energy” under the Energy Charter Treaty. The Energy Charter Treaty is a multilateral treaty that essentially protects foreign investors in the energy sector by allowing them to bypass the domestic courts of the host country and file a complaint to an ad hoc international tribunal to challenge proposed government regulations.

     Despite enormous public interest about the case, only minimal amounts of information have been made available to the public. The recent UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration might put pressure on the ICSID to be more transparent regarding the proceedings of the case... Click here to read the full article.