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A Sliver of Light in a Controversial Nuclear Power Arbitration

A phase-out of nuclear power has triggered a controversial legal dispute with Vattenfall, a Swedish state-owned energy company, which operated and owned two nuclear reactors. The legal proceedings have so far been highly secrete, but that is changing with a decision to open up the hearings to the public. 

By Nathalie Bernasconi-Osterwalder on October 10, 2016

Nuclear power has long-been a focus of public debate in Germany. However, the scales tipped decidedly against the energy source when—in the wake of the 2011 nuclear disaster in Fukushima, Japan—the German parliament decided to completely phase-out nuclear power by 2022.

That decision triggered a controversial legal dispute with Vattenfall, a Swedish state-owned energy company, which operated and owned two reactors that were decommissioned as a result of the parliamentary decision.

The case has gripped public attention in Germany for at least two reasons. First, it has brought attention to a dispute settlement process—known as investor-state dispute settlement (ISDS)—that had previously been largely unknown to the general public. While Germany has historically been a proponent of ISDS, having enshrined it in over a hundred of trade and investment agreements, it is only recently that the German Government has found itself on the receiving end of ISDS claims.[1]

By way of background, ISDS allows a foreign investor to sue states through international arbitration. It takes disputes that would otherwise be settled through domestic courts, and hands them to a small (normally three member) tribunal. This tribunal is unaccountable to the German public, and is not bound by German law. This is especially concerning in cases like the Vattenfall dispute, which centers both on important questions of public policy and German constitutional law.

Second is the lack of transparency that has characterized the proceedings so far. Secrecy is a common problem with ISDS—but the Vattenfall dispute has taken the problem to new heights. Copies of documents concerning the case have been kept secret in a high-security building. Press inquiries have been denied. In fact, not even parliamentarians have had access to meaningful information about the case.

The high level of secrecy is due the fact that the Energy Charter Treaty, which provides for ISDS in the energy sector, does not mandate transparency. Therefore, parties have the possibility to keep proceedings secret from the public—which is what Germany and Vattenfall have opted for over the past years. This is despite the fact that Germany has supported greater transparency in ISDS disputes at the European level.

After years of pressure for increased transparency, the voices calling for openness seem to have finally been heard: Germany and Vattenfall have agreed to make the hearings public. They will  begin on October 10th and will be streamed online and available to the public. This gives journalists, civil society, and the broader German public much needed insights into the nature of the dispute, and how the tribunal will respond to the sensitive public policy issues that it raises.   

IISD will be watching the proceedings closely, and reporting back on them. For those interested in learning more about the case, we have previously published a state-of-play report, which discusses the lack of transparency in the case in detail. A second IISD report provides further background on the case.

[1] In fact, it was an earlier claim by Vattenfall that first raised broad public attention to ISDS. This claim was a challenge to environmental restrictions imposed by the City of Hamburg on a coal-fired power plant. The dispute was settled when Germany agreed to adapt environmental requirements regarding the increased temperatures to the River Elbe through energy production.

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