"Quasi rejection of special arbitration proceedings on energy investments"

KARLSRUHE (dpa-AFX) - In the case of legal disputes with energy companies, EU states can have international arbitration proceedings actually provided for before German courts declared inadmissible. This was decided by the Federal Court of Justice (BGH) on Thursday on the basis of three cases in which Germany and the Netherlands are on one side and energy companies from other EU countries, including RWE and Uniper, are on the other. (Case no. I ZB 43/22 et al.)

The background to this is the so-called Energy Charter Treaty, according to which an independent arbitration court is to mediate in disputes between a country and investors from another country. The intention behind this is to give companies security of investment by having an independent body resolve conflicts. The BGH ruling should now render these proceedings obsolete, at least if one side is Germany or a German company. Especially since the Energy Charter Treaty is controversial anyway and an end is in sight.

When Germany and the Netherlands changed their energy policies in response to the climate crisis, this triggered conflicts with foreign investors. These then started arbitration proceedings at the International Centre for Settlement of Investment Disputes (ICSID), an independent institution within the World Bank Group. The Federal Republic of Germany has been a member since it was founded in 1966.

The companies are claiming large sums of money, in one case around 1.4 billion euros. According to the Federal Court of Justice, RWE and Uniper are involved in investments in Dutch coal-fired power plants. However, the Kingdom has since decided to phase out coal-fired power generation by 2030. In another case, several companies belonging to an Irish group are complaining that Germany has changed its legislation on wind energy specifically for offshore plants.

The two countries turned to German courts for a declaration that the proceedings were inadmissible. However, the Koln Higher Regional Court and the Berlin Superior Court reached different conclusions on whether the applications were lawful.

The BGH now granted states upstream national legal protection. Actually, ICSID itself decides on its jurisdiction, said the chairman of the first civil senate, Thomas Koch. But in the special constellation - both sides are an EU member state or come from one - Union law prevails.

And according to the jurisprudence of the European Court of Justice, in such constellations national courts are obliged to review an arbitration award. For this reason, the parties in this country were able to have the inadmissibility of such proceedings established at the outset, said Koch. This is a special feature of German law, he said. Because of the incompatibility with Union law, there was also a lack of effective consent and thus of an offer by the applicant EU states to conclude an arbitration agreement. [...]