EnBW: No State Liability for Unlawful Nuclear Power Moratorium Damages

The Bonn Regional Court (LG Bonn) dismissed EnBW’s compensation claim against the Federal Republic of Germany and the State of Baden-Württemberg. EnBW had asked for EUR 261 million because of the temporary unlawful moratorium shutdown of the Neckarwestheim I and Philippsburg I nuclear power plants.

1. Background

The German nuclear power exit after the Fukushima incident led to several court cases. The EnBW state liability case at LG Bonn is a consequence of an agreement of leading politicians on the federal and state level to temporarily have seven of Germany’s oldest nuclear power plants shut down, including the plants Neckarwestheim I and Philippsburg I operated by EnBW. This shutdown is also known as the three-month moratorium after the Fukushima nuclear accident.

As a consequence, EnBW reportedly declared to voluntarily shut down Neckarwestheim I. On 16 March 2011, the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) informed the competent state ministries of the decision of the Federal Government and participating state minister presidents to take the seven oldest nuclear power plants from the grid for at least three months, based on Section 19(3)(2) No. 3 Atomic Power Act, as due to their age and because of the incidents in Japan suspected danger (Gefahrenverdacht) would be present. The state ministries were asked to order the shutdown with this justification. By letter of the same day, the competent ministry in Baden-Württemberg ordered the shutdown of Neckarwestheim I and Philippsburg I. The letter was largely identical with the BMU letter of 16 March 2011, adding that the order was issued as the petition of and in coordination with (“auf Bitten und in Abstimmung”) BMU.

EnBW took both plants offline on 16 and 17 March 2011. Furthermore, EnBW did not restart the plants even after the moratorium ended. EnBW never challenged the shutdown order in court, and only asked for damages later. More specifically, EnBW asked for EUR 261,191,024.49 in damages for the shutdown of Neckarwestheim I and Philippsburg I between 16/17 March and 6 August 2011. On 6 August 2011, the 13th amendment of the Atomic Energy Act (AtG) that provided for a staggered nuclear phase-out until 2022 entered into force.

German state liability law is only partly codified, with several areas having been shaped by court decisions. However, a general principle of German state liability doctrine is that anyone suffering from an unlawful act by the state will have to challenge that unlawful act first if he wants to claim damages later.  By not challenging an unlawful administrative act, the act becomes binding, regardless of legality of the decision. In particular, in principle one cannot “suffer and liquidate (“dulde und liquidiere”) ”, i.e. accept the unlawful decision and claim damages later.

2. Court Decision

The full decision of LG is not yet available. Based on the court’s press release, LG Bonn rejected the claim against the Federal Republic of Germany because it did not issue the shutdown order. Regarding the State of Baden-Württemberg, the claim was unfounded as EnBW did not challenge the moratorium shutdown order. EnBW did not take all necessary measures to avert the damage for which it was now seeking compensation.

Challenging the shutdown order was likely to have been successful, as the moratorium shutdown order was unlawful. In particular, the state authority simply took the decision of others and did not correctly exercise its own discretion when ordering the shutdown. Also, the mere reassessment of risks after the Fukushima incidents and the age of the power plants do not sufficiently demonstrate the specific possibility of damage by operating the nuclear power plants that might have justified a shutdown.

Filing a lawsuit against the shutdown order would have suspended the effectiveness of the order, so that both power plants would not have to be shut down, and the resulting damage would have been avoided. Filing such a lawsuit would not have put an undue burden on EnBW. Looming consequences such as losing customers or damage to the corporate image are business policy and strategic reasons that do not qualify as undue burden which could justify abstaining from filing the challenge in court.

To the extent EnBW claimed damages for the time after 16 June 2011, the court ruled that those damages were not caused by the shutdown order, as its effectiveness was limited to three months.

3. Further Developments

EnBW can appeal the decision within a month.

Depending on the ultimate outcome of the lawsuit against Baden-Württemberg and the Federal Republic, the wisdom of EnBW’s earlier decision not to challenge the shutdown orders may be questioned again. And the wisdom to file the lawsuit for damages. Any management decision not to challenge an unlawful order that leads to EUR 261 million in damages normally needs a sound justification, otherwise management could be exposed to claims for not sufficiently safeguarding company and shareholder interests. Shareholders (or the management of shareholders) themselves may need to review whether they have to seek redress for the loss in value of their shares. In the case of EnBW, the situation is rather particular as the state of Baden-Württemberg is commercially sitting on both sides of this lawsuit. EnBW is owned by state and municipally controlled entities from Baden-Württemberg. While some (or many) may find it politically preferable to just close the nuclear power plants, to loose the liability lawsuit and not to pay damages for unlawful closure, it is by no means clear from a legal point of view that such political considerations would justify not going after those that are responsible for the commercial damage, including the cost of unsuccessful lawsuits.

Sources: Press release LG Bonn, Frankfurter Allgemeine Zeitung, Reuters

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