Vattenfall request for arbitration sheds new light on dispute with Germany

By Damon Vis-Dunbar
11 July 2009

Investment Treaty News (ITN) has posted the request for arbitration by the Swedish energy utility Vattenfall against the Government of Germany.

In April Vattenfall brought the German government to international arbitration in a challenge to environmental restrictions imposed by the City of Hamburg on a coal-fired power plant under construction along the banks of the Elbe River.

The arbitration request reveals that Vattenfall seeks approximately €1.4 billion in damages for alleged violations of the Energy Charter Treaty, a multilateral agreement governing investments in the energy sector.

Vattenfall’s Moorburg power plant has stirred controversy since it was announced in 2004, with a coalition of environmental and political groups maintaining that the plant would be far larger than what is needed to meet Hamburg’s energy needs.

Nonetheless, Vattenfall was given a preliminary permit in 2007 to begin partial construction of the power plant. However, final approval required emissions and water permits by Hamburg’s Urban Development and Environment Authority. These permits, granted in 2008, are “coupled with restrictions”, says Vattenfall.

In particular, Vattenfall complains that the restrictions on the amount of cooling water that can be used and discharged by the plant would make the project uneconomical, and deviate from a 2007 agreement with the City of Hamburg in which Vattenfall agreed to certain limits on the power plant’s impact on the Elbe River.

The Swedish firm charges that the “severe restrictions” in the water permit and are linked to Hamburg’s Green Party, which formed a coalition government in Hamburg in 2008, and has been highly critical of the power plant.

An official with the City of Hamburg defends the restrictions, however, telling ITN that they are necessary under a European Commission directive (the EU Water Framework Directive), and are consistent with the restrictions required of all industry along the Elbe River.

So far the German government has refused to provide on-the-record comments about the case, on the grounds that it is against government policy to comment or disclose information on pending arbitrations.

ITN will provide further reporting on the Vattenfall v. Germany arbitration in its forthcoming newsletter, to be published next week.

The request for arbitration is available here.