• German Nuclear Fuel Tax: Energy Companies Suffer Setback at Federal Court Of Finance
  • July 2, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Introduction

    A recent court decision means that nuclear power plant operators in Germany will have to continue to pay the German nuclear fuel tax (Kernbrennstoffsteuer). The German Federal Court of Finance (Bundesfinanzhof - BFH) has recently overruled a decision of the local Finance Courts in Hamburg and Munich which had granted provisional legal protection from the German nuclear fuel tax (decisions dated 9 March 2012 - BFH VII B 171/11 and VII B 185/11).

    The German nuclear fuel tax has been levied upon the operators of nuclear power plants in Germany since January 2011. The tax is triggered when a nuclear reactor is equipped with a fuel element. The amount of tax depends on the weight of the nuclear fuel used. The tax rate is € 145 per gram of nuclear fuel.

    As part of the deal introducing the nuclear fuel tax, the Federal legislature agreed to extend the life of nuclear power plants in Germany. However, in light of last year’s nuclear disaster in Fukushima, the government revoked this extension and instead announced and implemented a shut down of all nuclear power plants in Germany, with nuclear power to be phased out by 2022.

    The energy companies E.ON, RWE and EnBW initiated court action against the nuclear fuel tax, arguing that the Nuclear Fuel Tax Act was unlawful and that the introduction of the tax was conditional on the extension of the life of nuclear power plants.


    Decisions of the local Finance Courts

    The local Finance Courts in Hamburg and Munich held that there were serious doubts as to whether the nuclear fuel tax was in accordance with the constitution and therefore ordered a refund of the tax that had already been paid by the energy companies. However, the Finance Court in Baden-Württemberg held that there were no serious doubts in relation to the constitutionality of the nuclear fuel tax and accordingly rejected the application for provisional legal protection.

    In their decisions, the local Finance Courts in Hamburg and Munich argued that the nuclear fuel tax is not a consumption tax (Verbrauchsteuer) and therefore that it is outside the legislative competence of the Federal Government. The courts questioned whether the Federal Legislator is legally authorised to introduce the nuclear fuel tax as a new type of tax. The Finance Court in Baden-Württemberg, in contrast, took the view that the nuclear fuel tax is in accordance with both the German constitution and European Law.    


    Decision of the BFH

    On appeal by the relevant tax office, the BFH overruled the decisions of the local Finance Courts in Hamburg and Munich to grant provisional legal protection against the nuclear fuel tax. The BFH determined that the public interest in the validity of the Nuclear Fuel Tax Act outweighed the interest of the power plant operators in obtaining provisional legal protection, and that, in deciding whether such protection should be afforded, the issue of whether or not the Nuclear Fuel Tax Act was enacted in accordance with the German constitution or European law is not critical. Accordingly, the BFH did not decide this issue.

    Therefore, for the time being, operators of nuclear power plants are obliged to pay the German nuclear fuel tax whilst the bigger question of whether the nuclear fuel tax is enacted in accordance with the German constitution and with European law remains to be decided in the course of the principal legal proceedings (Hauptsacheverfahren).