This case arose under the Energy Charter Treaty (ECT) and involved a series of changes in the German regulatory framework for offshore wind energy since 2012. These changes include the centralization of the grid connection system and the introduction of a tender system for grid capacity allocation. STRABAG SE, a multinational construction company, filed an ICSID claim alleging these regulatory changes resulted in a loss of its investments in several offshore wind projects, constituting a breach of Germany’s obligations under the ECT.

NERA was engaged by the claimants to analyze Germany’s regulatory changes from an economic perspective and assess their impact on the value of the claimants’ investments. The NERA team comprised Senior Managing Directors Richard Hern and Tomas Haug, Director Dominik Hübler, Senior Consultant Niko Czaplicki, Consultants Maximilian Czernin and Leonie Janisch, and Economic Analyst Daniel Neuhold.

Our experts evaluated Germany’s regulatory changes from an economic standpoint, examining investor expectations, the reforms’ impact on offshore wind development in Germany, and alternative policy measures the government could have adopted. The NERA team also reviewed the historical evolution of the regulatory framework, including the incentive regime that initially favored investment and subsequent revisions that negatively affected the claimants’ projects, as well as regulatory regimes adopted in other countries.

Additionally, the NERA team assessed the affected offshore wind projects’ loss in value resulting from the regulatory changes. Our quantum assessment reflected the specific characteristics of the German offshore wind sector, including permitting regimes and differences in project development stages. To this end, we employed a market-based valuation approach based on comparable transactions, which the tribunal endorsed in its award: “Having considered the evidence of the Parties’ experts, the Tribunal determines that the appropriate valuation method in the present case is the comparable transactions method.”

Dr. Hern and Mr. Haug presented NERA’s analyses in a series of expert reports and provided testimony at an ICSID hearing in London. The tribunal ruled in favor of the claimants, awarding 334 million euro in damages, marking the first known investment treaty award against Germany. The tribunal sided with NERA’s findings that Germany’s policy changes had significant adverse implications and concluded Germany breached the ECT’s fair and equitable treatment (FET) standard. On quantum, the tribunal sided with NERA’s approach to valuing the claimants’ offshore wind projects and awarded damages broadly consistent with NERA’s assessment.

For more information about the case, please click here for an article published by Global Arbitration Review (GAR).