Ministerial Draft: New General Controlling Company Liability Concept for Nuclear Power Operators

A ministerial draft for an Act on Continued Liability for Nuclear Decommissioning and Disposal Costs contains a concept to establish a new system of general controlling company liability for nuclear power operators. The aim is to ensure continuing and in particular create new liability  for the costs of Germany’s staggered nuclear power exit until 2022 and the follow-up costs. The draft is a reaction to concerns regarding liability of the nuclear companies prompted by the announcement of E.ON SE to split into two companies. According to media reports, E.ON considers taking legal action should the law be passed.

1. Ministerial Draft

Unlike other energy related legislation the draft is short, comprising only seven provisions. The key aim of the law is to make the groups that currently operate nuclear power plants in Germany (E.ON SE, RWE AG, EnBW AG and Vattenfall AB are specifically named) liable for the liabilities of the actual nuclear power operating companies. Contrary to what can frequently be read (and is also said in the legislative memorandum), the proposed liability regime is not a “conservation” of the current liability regime, but shall establish a new, independent group company liability regime for nuclear power liability.

According to Section 1 para. 2 of the draft, controlling enterprises (herrschende Unternehmen) in the sense of Section 2 paras. 1 and 2 of the draft are liable to the eligible body (anspruchsberechtigte Körperschaft) for all present and future financial liabilities concerning the decommissioning, dismantling and the disposal of nuclear waste according to the Atomic Energy Act (AtG) relating to German nuclear power plants. This is a new concept. Currently, parent companies of nuclear power operating companies are not automatically liable for liabilities of the subsidiary.

Section 1 para. 4 of the draft states that in case a liability cannot be enforced because the operator does not exist anymore as a separate legal entity, the controlling enterprise is liable.

Section 2 paras. 1 and 2 define controlling enterprises in an independent way, i.e. not depending on the existing domination and control situation liability concepts. Paragraph 3 states that control is not lost when the operator ceases to exist as a separate legal entity. The legislative memorandum specifically mentions that potential controlling influence shall suffice, and that the liability shall extend to the ultimate parent. Again, this is new, and not based on existing law.

Section 3 also aims to provide for continued liability. Paragraph 1 stipulates that control does not cease to exist even if control as defined in Section 2 paras. 1 and 2 is terminated after the entry into force of the law. Therefore, a current parent company will remain liable even after selling the shares of its subsidiary. Furthermore, according to paragraph 2 control cannot be transferred by means of singular or universal succession (Einzel- und Gesamtrechtsnachfolge) to third parties with the effect that the controlling enterprise becomes exempt.

Pursuant to Section 4 liability under Section 1 paras. 1 and 2 ends at the latest once all the substances that are subject to an obligation to surrender are fully  delivered to a permanent nuclear waste disposal site and the site will have been closed.

The draft tries to present the whole concept as a “conservation” of the current liability regime.  This is misleading. Legally speaking, the proposal goes above and beyond the existing liability regime by establishing a new, independent general liability regime for companies that directly or indirectly potentially control nuclear power operating companies.  It is also meant to apply to companies that currently are not liable for liabilities of its subsidiary. In a nutshell, the draft does away with basically any limitation for nuclear power decommissioning, dismantling and disposal obligations from the operating company upwards. The new regime would create a new class of “toxic shareholding”, where a broadly defined concept of “control” over a nuclear power operator would create liability up to the ultimate parent, also outside of Germany.

The government shall decide about the bill on 23 September 2015 so as to provide for an entry into force of the law before the end of the year, Rheinische Post (RP) said. The bill needed consent by the Federal Council (that represents the interests of the sixteen German states), the ministry did, however, not expect objections, RP added.

2. Reaction by E.ON

E.ON announced to take legal action in case the law would be passed, media sources said. According to RP and Frankfurter Allgemeine Zeitung the company believes that the bill in its current form violates constitutional law in particular due to the fact that liability is not limited in time or amount.

[revised]

Sources: Ministerial Draft; Rheinische Post; Frankfurter Allgemeine Zeitung

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