German government mum on Vattenfall ECT Claim

By Damon Vis-Dunbar
2 May 2009

The German government has declined to provide information on an investment dispute with the European utility Vattenfall on the grounds that it is against government policy to comment or disclose information on pending arbitrations.

As has been reported in the financial press, Vattenfall is bringing the German government to international arbitration due to environmental restrictions imposed on a planned coal-fired power plant.

According to press reports, Vattenfall was given preliminary approval to build the plant in 2007; however, a new coalition government that includes the Green Party raised concerns over the environmental impact of the plant. The company complains that Hamburg has introduced restrictions on the plant that make the operation economically unfeasible.

Vattenfall is suing Germany for violations of the Energy Charter Treaty (ECT), a multilateral trade and investment agreement that governs investments in the energy sector.

The ECT contains a dispute resolution mechanism that allows investors to bring member governments to international arbitration over alleged violations of the treaty.  While twenty investor-state arbitration cases under the ECT have been documented, this is the first publicly disclosed claim against a western European government. The governments of the former Soviet Union and Eastern Europe have received the bulk of the ECT investor claims.

There is, however, no definitive account of the number of ECT claims, since the parties to an ECT investor-state dispute are under no obligation to publicly reveal the existence of arbitration cases.

Vattenfall has not disclosed how much money it is seeking in damages. A German source tells ITN that the government is in talks with the company, and both parties hope to reach a settlement.