Library of Congress

Law Library of Congress

The Library of Congress > Law Library > News & Events > Global Legal Monitor

Germany: Compensation to Utilities for Acceleration of Nuclear Energy Phase-Out

(Dec. 21, 2016) On December 6, 2016, the German Federal Constitutional Court (Bundesverfassungsgericht, BVerfG) ruled that the 13th Act to Amend the Atomic Energy Act was partially unconstitutional.  The 13th Amendment Act for the first time set fixed end dates for the operation of nuclear power plants and reduced the additional operating time that had been granted in 2010.  (BVerfG, Dec. 6, 2016, docket nos. 1 BvR 2821/11, 1 BvR 321/12, 1 BvR 1456/12, BVerfG website (in German); Press Release No. 88/2016, BVerfG, The Thirteenth Amendment to the Atomic Energy Act Is for the Most Part Compatible with the Basic Law (Dec. 6, 2016); Dreizehntes Gesetz zur Änderung des Atomgesetzes [13. AtG-Novelle] [13th Act to Amend the Atomic Energy Act] [13th Amendment Act], July 31, 2011, BUNDESGESETZBLATT [BGBl.] [FEDERAL LAW GAZETTE] I at 1704; Basic Law for the Federal Republic of Germany (May 23, 1949), BGBl. I at 1, as amended, art. 14, GERMAN LAWS ONLINE (unofficial English translation).)

The Court held that even though the general decision to set fixed end dates and to reduce the additional operating time did not constitute an expropriation, the law violated the constitutionally guaranteed right to property because the electricity output allowances allocated to each power plant could not be fully used by the end date and that the 13th Amendment Act did not provide for compensation for investments made by the utilities in reasonable expectation of the additional operating lifetime.  The Court set a deadline of June 30, 2018, for the legislature to draw up new provisions.  (BVerfG, supra at 399.)

Background

In 2002, the German parliament enacted the Phase-Out Act. It allocated residual electricity output allowances to individual nuclear power plants that could also be transferred to other, newer power plants. The nuclear power plants were to be shut down after the allocated amounts were used up. The 2002 Phase-Out Act did not set fixed end dates for the operation of the nuclear power plants. (Gesetz zur geordneten Beendigung der Kernenergienutzung zur gewerblichen Erzeugung von Elektrizität [Ausstiegsgesetz] [Act on an Orderly Phase-Out of the Use of Nuclear Energy for Commercial Generation of Energy] [Phase-Out Act], Apr. 22, 2002, BGBl. I at 1351; BVerfG, supra, at 5-13.)

In 2009, the newly elected German government agreed on a modified energy policy. According to the modified energy policy, nuclear energy was to be used for a longer period of time as a “bridging technology.” The 11th Amendment Act to the Atomic Energy Act therefore granted additional electricity output allowances to the nuclear power plants, thereby extending the operating life of the plants by an average of 12 years. (Elftes Gesetz zur Änderung des Atomgesetzes [11. AtG-Novelle] [11th Act to Amend the Atomic Energy Act] [11th Amendment Act], Dec. 8, 2010, BGBl. I at 1814; BVerfG, supra, at 14 & 15.)

Following the Fukushima, Japan nuclear accident in 2011, the German parliament enacted the 13th Amendment Act, which did set fixed end dates for the operation of nuclear power plants and reversed the decision to award additional electricity output allowances to the  plants. (BVerfG, supra, at 22 & 33.)

Decision

The constitutional complaint filed by nuclear energy subsidiaries of three out of the four major utilities in Germany and one nuclear power plant operating company alleged that the 13th Amendment Act infringed on their constitutionally guaranteed right to property, codified in article 14, paragraph 1, of the German Basic Law, the country’s Constitution. The right to property protects the “ownership of things under private law, their possession, and the possibility to make use thereof.” (Id. at 228.) The constitutional complaint also invoked the clauses on infringement of the freedom of occupation (Basic Law, art. 12) and violation of the prohibition of laws that only apply to a special case (id. art. 19 ¶ 1), but did not challenge the general decision to phase-out nuclear energy. (BVerfG, supra, at 212 & 213.) The Court focused its decision on the alleged violation of the right to property.

The Court held that the 13th Amendment Act infringed on the complainants’ property rights in several ways, but did not constitute an expropriation. (Id. at 214.)  Expropriation is defined as the “complete or partial revocation of specific subjective property interests for the purpose of fulfilling certain public tasks.” In addition, an expropriation must constitute an “acquisition of goods for the benefit of the public authorities.” (Id. at 245.) It is not the same as the constitutional power of the legislature to define the contents and limits of property for the public good. An expropriation always requires compensation, whereas a determination of the contents and limits of property only needs to be compensated in limited circumstances. (Id. at 253 & 260.) The Court concluded that the setting of fixed shut-down dates and the granting of additional electricity volumes did not constitute stand-alone property interests that could be expropriated independently of the property of the nuclear power plants. (Id. at 262-264.) In addition, no acquisition of goods took place. (Id. at 265.)

The Court stated that the provisions of the 13th Amendment Act largely satisfy the requirements for a determination of the contents and limits of property. It reiterated the fact that every determination of the contents and limits of property must balance the owner’s interests with the public good and adhere to the principles of proportionality, legitimate expectation, and equality. (Id. at 268.) In the Court’s opinion, accelerating the nuclear energy phase-out and thereby limiting the residual risk associated with nuclear energy was a legitimate objective. Furthermore, setting fixed end dates and striking the previously granted additional electricity output allowances were suitable means to fulfill this objective. (Id. at 283-290.) The granting of additional electricity output allowances in 2010 was politically motivated and did not constitute compensation for limiting the complainants’ property. The Court therefore concluded that the granting of additional electricity output allowances only benefitted to a small degree from the constitutional protection of property and the reversal of that decision was therefore proportional. (Id. at 300 & 301.)

On the other hand, the Court found there had been a violation of the complainants’ property rights due to the fact that the 13th Amendment Act prevented them from using all the residual electricity volumes that were allocated to the nuclear power plants in 2002. It held that the 2002 Phase-Out Act was intended to compensate for the loss of the unlimited use of the nuclear power plants and gave rise to a particular, legitimate expectation that the utilities would be able to use their allocated residual electricity amounts. (Id. at 310 & 329.)

In addition, the Court stated that the 13th Amendment Act violated the constitutional right to property insofar as it did not provide for any transitional periods, compensation clauses, or other settlement provisions for investments made relying on the additional electricity output allowances allocated in 2010. (Id. at 369.) It held that investments undertaken in the legitimate expectation of the stability of a legal situation can under certain circumstances be protected by article 14 of the Basic Law. (Id. at 371.) In the Court’s opinion, the complainants could reasonably expect that the nuclear energy policy would not fundamentally change again in the same legislative period. Insofar as the 13th Amendment Act did not provide for compensation for investments made relying on the decision to use nuclear energy for a longer period of time as a “bridging technology” during the period from 2010 until 2011, the Act was found unconstitutional. (Id. at 376 & 377.)

The Court set a deadline of June 30, 2018, for the legislature to draw up new provisions. (BVerfG, supra at 399.)