Legal meltdown Taxing Times For Nuclear Providers

German power companies have suffered a major blow after a report by a powerful E.U. court official failed to back their fight against a tax on nuclear energy.
Germany is phasing out nuclear power.

Shares of utilities E.ON and RWE plunged up to 5 percent on Tuesday morning after Maciej Szpunar, advocate general at the European Court of Justice in Luxembourg, ruled that Germany's tax on nuclear fuel does not violate E.U. law.

In another blow, he added that the levy is not unlawfully aiding the competition, sweeping away the power companies' arguments against the tax.

The opinion is non-binding as judges at the European Court of Justice are not obligated to follow the advocate general’s opinion. But more often than not, they do.

The nuclear-fuel tax was introduced in 2011 and is supposed to be levied until 2016. It is part of Germany’s shift to renewable energies and phasing out of nuclear power, a prrocess dubbed Energiewende.

According to the companies, the tax has already cost E.ON €2.3 billion ($2.6 billion), RWE €1.23 billion and EnBW, another energy company, €1.1 billion.

We think it possible that the ECJ will reach a different conclusion. Jochen Lüdicke, Partner, Freshfields Bruckhaus Deringer

E.ON, RWE and EnBW had filed cases with several German fiscal courts against the tax. Judges in Hamburg decided to ask the ECJ to look into the tax’s compatibility with E.U. law.

The electricity providers’ reactions to the advocate general's report were rather calm. “E.ON doesn’t share the assessment of the advocate general, but will wait for the final verdict by the ECJ and the German Federal Court before commenting further,” a spokesperson said.

RWE said: “We will first await the final verdict by the ECJ, expected in 2015, because we are still sticking to our legal position.”

E.ON has good reason to look to the German Federal Court. The utilities companies based their lawsuits on several arguments. While one of them was a breach of E.U. law, they also claim the tax violates basic German law. According to the power companies, the government had no right to levy the tax in the first place.

The electricity providers had already won a partial victory in Germany last summer. A court in Hamburg had ruled the tax to be unlawful – and asked the government to pay back the money the companies had already transferred until a final decision was made.

But Germany’s Federal Fiscal Court later revoked that ruling, and the final decision now lies with the Federal Court of Justice.

Jochen Lüdicke, partner at law firm Freshfields Bruckhaus Deringer, still sees a ray of hope for the utilities in the ECJ report. “The advocate general considers the tax to be compliant with E.U. law, but was surprisingly cautious in his wording. We think it possible that the ECJ will reach a different conclusion.”

Mr. Lüdicke also pointed out that the advocate general classified the tax as a producers’ tax, which means legislative powers would lie with Germany's states and not the federal government. This would strengthen the power companies' argument that the federal government does not have jurisidiction.

“This assessment will most likely be of utmost importance for the case filed with the Federal Court of Justice,” said Mr. Lüdicke.

 

Jürgen Flauger covers energy issues for Handelsblatt, Volker Votsmeier is an investigative reporter. To contact the authors: [email protected], [email protected]