Power Shift | 19 May 2025
Dangerous precedent: How an arbitration claim is jeopardising Germany‘s coal phase-out
A Swiss public company, Azienda Elettrica Ticinese (AET), is demanding compensation in an international arbitration tribunal for Germany‘s coal phase-out. The company holds shares in a German coal-fired power plant that will cease operations due to the phase-out. The case is an example of ongoing and prob lematic attempts to make the public pay for bad fossil fuel investments by deploying a one-sided arbitration mechanism.
→ In a campaign against AET‘s involvement
in the coal-fired power plant, civil society or-
ganisations highlighted the economic risks of
the project. These concerns were ignored by
AET – and then materialised once the power
plant went into operation. The power plant
has incurred losses every year since its con-
struction. AET is thus demanding compen-
sation for a plant that has been loss-making
and is expected to remain so, despite having
been warned of this potential outcome of its
investment.
→ In the arbitration proceedings, AET is
demanding compensation for its hypotheti-
cal revenues from the power plant until 2053.
However, the results of a Swiss referendum
meant that AET was anyway obliged to
withdraw from its investment in the plant
by 2035 at the latest. In addition, European
coal-fired power plants are currently ex-
pected to wind up operations as early as the
2030s, due to the rising price of emission
certificates. Through the arbitration, AET is
attempting to claim profits that it would
clearly never have been able to generate in
reality.
→ If AET succeeds in the proceedings, the
architecture of the German coal phase-out
will be called into question, and this could
lead to further challenges from coal compa-
nies in arbitration tribunals. It is an example
of the danger that international arbitration
tribunal cases pose to the much-needed
ongoing energy transition, and to public
budgets.
It is imperative that countries like Germany and Switzerland withdraw from investment protection agreements that enable cases like AET‘s. This is the only way to eliminate the considerable risks to climate policy and public coffers posed by arbitration tribunals.
