On 20 September 2019, ICSID registered a request by the Austrian construction company STRABAG SE (“Strabag”) for the initiation of an ICSID arbitration proceeding (ICSID Case No. ARB/19/29). Strabag and two of its affiliates (“Erste Nordsee-Offshore Holding GmbH” and “Zweite Nordsee-Offshore Holding GmbH”) are suing the Federal Republic of Germany for damages in a still unknown amount.
So far, no documents are public except for the notification of a request for arbitration. The notification, however, clearly shows that the dispute relates to investments in the renewable energy sector. Strabag invokes the Energy Charter Treaty (ECT), which is an international agreement establishing a multilateral framework for cross-border cooperation in the energy industry.[1] Both EU Member States involved, Germany and Austria, are signatories to the ECT. The ECT allows investors to sue a state before an international ICSID arbitral tribunal instead of submitting the dispute to the host country’s state courts (Article 26 ECT).
Strabag is a listed company and one of the largest construction companies in Europe. According to the Frankfurter Allgemeine Zeitung, the ICSID claim relates to Strabag’s offshore-activities in the German Northern Sea.[2] Since 2009, Strabag was investing in offshore-projects there, where it had originally planned to build approximately 850 wind turbines by 2026. However, Strabag has increasingly withdrawn its plans and has instead begun to sell its shareholdings. In 2014, for example, Energy Baden-Württemberg AG (EnBW) acquired the Albatros offshore wind farm project from the consortium partners Strabag and the Norderland/ETANAX Group.[3] In 2016, Strabag’s subsidiary, Erste Nordsee-Offshore-Holding GmbH, sold its shares in an offshore wind project (“Northern Enegery Global Tech II GmbH”) to another leading energy company, Vattenfall.[4]
According to an interview with JUVE, Strabag now claims negative economic effects on its investments due to an increasing regulation of the German energy market.[5] The main reason for Strabag’s claim appear to be the amendments to the German Renewable Energy Sources Act (EEG). The EEG promotes the development of energy generated from renewable resources. The EEG is regarded as an innovative and successful energy policy measure. It first came into force on 1 April 2000 and has been modified several times since.
The EEG originally provided a feed-in tariff (“FIT”) scheme to encourage the generation of renewable electricity. The state and investors concluded long-term contracts with state-fixed funding rates. This changed as of 2014, when the legislator introduced an auction system, according to which the funding rate for most renewable energy systems will be determined through tenders. This principally means that those who demand the least for the economic operation of a new renewable energy plant will receive financial support.
The ICSID tribunal will have to examine whether the changes made by the German legislator justify a claim for damages by Strabag, despite Achmea and other recent developments in investment arbitration. The proceedings initiated by Strabag are now the third ICSID proceedings brought against the Federal Republic of Germany. It is to be assumed that the Strabag case will continue to keep Germany busy for a long time to come as it is the case with the second (in)famous ICSID claim against Germany still pending, the Vattenfall case. In 2015, the Vattenfall case became the public scapegoat for critics of international investment arbitration proceedings. The public outcry over allegedly “back door justice” was massive. Yet, the German public has not widely taken note of the Strabag case. If recent history is any indication, both Parties and the involved law firms may prefer to keep it that way.
Global Arbitration News will keep you up to date.
[1] The ECT has already been a topic on GAN several times; see https://www.globalarbitrationnews.com/?s=Energy+Charter+Treaty.
[2] https://www.faz.net/aktuell/wirtschaft/Strabag-verklagt-deutschland-vor-dem-icsid-schiedsgericht-16399010.html.
[3] https://www.strabag.com/databases/internet/_public/content.nsf/web/47F06B86093E305CC1257DB30046E48A.
[4] https://www.strabag.com/databases/internet/_public/content.nsf/web/D10F3B4022243D25C125800B0049EC76.
[5] https://www.juve.de/nachrichten/verfahren/2019/09/streit-um-offshoreausbau-STRABAG-schiebt-mit-freshfields-schiedsverfahren-gegen-deutschland-an).
