Constitutional complaints against the Offshore Wind Energy Act partially successful due to lack of compensation for offshore wind farms that have already been planned

Press Release No. 78/2020 of 20 August 2020

Order of 30 June 2020
1 BvR 1679/17, 1 BvR 2190/17

(Offshore Wind Energy Act)

In an order published today, the First Senate of the Federal Constitutional Court held the Act to Develop and Promote Offshore Wind Energy (Gesetz zur Entwicklung und Förderung der Windenergie auf See – Windenergie-auf-See-Gesetz, Offshore Wind Energy Act) to be unconstitutional insofar as it does not provide for any compensation for the planning and site investigation expenses incurred by developers whose projects were initiated under previously applicable law but were terminated when the Act entered into force. Compensation is required where documents and results of any investigations can still be utilised for the “preparatory site investigations” conducted by the state under the new law. For the rest, the constitutional complaints are rejected.

Under the Ordinance on Offshore Installations Seaward of the Limit of the German Territorial Sea (Verordnung über Anlagen seewärts der Begrenzung des deutschen Küstenmeeres – Seeanlagenverordnung, Offshore Installations Ordinance), which was applicable until the end of 2016, the complainants had submitted requests for approval of offshore wind farms located in the exclusive economic area in the North Sea defined under international law by the Convention on the Law of the Sea. Within the exclusive economic area, no private property rights can be established on the seabed. Based on the previous legal situation, the complainants had conducted planning and site investigations in that area at their own expense. With the introduction of the Offshore Wind Energy Act, the approval procedure for wind farms located in the exclusive economic area was fundamentally revised. Prior to the Act entering into force, offshore wind farms could be approved without any prior formal planning or systematic coordination of the establishment of connection to the power grid. With the introduction of the Offshore Wind Energy Act, more detailed provisions for the approval procedure were put in place. Approval is now preceded by site development for which the state is responsible and by a centralised process for inviting tenders; the establishment of wind farms and grid connection are now coordinated. In order to transition to the new system, ongoing planning approval procedures were terminated and previously issued permits lost their validity. The provisions under the transitional legal framework are not applicable to the complainants’ projects.

The First Senate of the Federal Constitutional Court held that the Offshore Wind Energy Act has a quasi-retroactive effect (unechte Rückwirkung) that is not entirely justified under constitutional law. The provisions challenged by the complainants are not absolutely necessary and therefore partially incompatible with the general principle of the protection of legitimate expectations under Art. 2(1) in conjunction with Art. 20(3) of the Basic Law (Grundgesetz – GG), as the legislator could have used equally suitable but less intrusive means to achieve the intended purposes. The complainants must receive financial compensation for any necessary expenses for planning and site investigations insofar as this can be of use to the preparatory site investigation conducted by the state under §§ 9 et seq. of the Offshore Wind Energy Act. To be considered of use, tenders to establish an offshore wind farm on the relevant site must be accepted by 31 December 2030. The legal basis for such interests in compensation must be set out by the legislator in greater detail. The legislator is obligated to do so until 30 June 2021 at the latest.

For the rest, the Offshore Wind Energy Act is compatible with the requirements of the general principle of the protection of legitimate expectations. The Act violates neither the fundamental right to property under Art. 14(1) GG nor the fundamental right to freedom of occupation under Art. 12(1) GG nor the general guarantee of the right to equality under Art. 3(1) GG.

Facts of the case:

The constitutional complaints are directed against provisions of the Offshore Wind Energy Act. The Act created new rules, in force since 1 January 2017, for the establishment of offshore wind farms particularly in the exclusive economic areas in the North Sea and the Baltic Sea. Prior to the Act entering into force, offshore wind farms could be approved on the basis of priority considerations, without any prior formal planning or systematic coordination of grid connection. As the law now stands the state conducts a preparatory investigation of specific sites which are designated in a Site Development Plan drawn up by the state. The Bundesnetzagentur (Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway) invites tenders for any site for which an investigation has been completed. The bidder whose tender is accepted has an exclusive right that a formal planning approval procedure be carried out and a right to receive payment for any electricity they will produce in the future. The provisions on the approval of offshore wind farms must be read together with the provisions on grid connection, as establishing a wind farm makes no economic sense if it is not connected to the power grid. The Offshore Wind Energy Act coordinated the planning of wind farms and the development of grid connection. In relation to wind farms on the relevant site, the bidder whose tender is accepted also has a right to have access to a power line that establishes connection to the power grid and a right to the assigned grid capacity. Pursuant to § 46(3) of the Offshore Wind Energy Act, any procedures that had been initiated prior to the Act entering into force were terminated on 1 January 2017; permits that had already been granted could not be extended and are no longer valid under the current law anyway. § 77(1) of the Offshore Wind Energy Act creates a transitional legal framework for wind farms that have been established subject to the provisions of the Offshore Installations Ordinance and started operating prior to the Offshore Wind Energy Act entering into force. The Act also creates a transitional framework for wind farms that have not yet but will start operating by the end of 31 December 2020 and for which grid connection has been confirmed unconditionally or which have been assigned grid capacity. In addition, §§ 26 et seq. of the Offshore Wind Energy Act provides for invitations for tenders for “existing projects” during a transitional period. Beyond this, § 39 of the Offshore Wind Energy Act affords owners of such a project a right to take over the acceptance of the tender. However, none of these provisions are applicable to the complainants’ projects.

The complainants are businesses that requested approval to establish offshore wind farms pursuant to the provisions of the Offshore Installations Ordinance which was applicable before the Offshore Wind Energy Act entered into force. One of the complainants had even been granted a permit under the old law. However, none of the projects had started operating. Construction had not yet taken place either. The necessary power line for offshore grid connection was not available for any of the projects and it was not likely that such connection would be established in the near future for any of the proposed wind farms. Above all, none of the complainants had received confirmation of grid connection under the provisions of the Energy Act which were applicable at the time. However, between 2009 and 2011, the complainants conducted an environmental base line survey of the relevant site as part of the approval procedure. Most of them also conducted an investigation of the ground of the building site and submitted an environmental impact assessment. Each of the complainants incurred costs amounting to several million euros; costs for surveying the affected marine area and for assessments of environmental and ground conditions make up the majority of that amount. In March 2015, the Federal Maritime and Hydrographic Agency announced that all planning approval procedures for wind farms in zones 3 to 5, in which all projects at issue in these proceedings are located, would be discontinued, as there was no prospect that grid connection could be established soon.

The position the complainants had reached in the procedural process under the old law no longer has any legal effect under the Offshore Wind Energy Act and they have not received any compensation in return; the complainants claim that their fundamental rights have thereby been violated.

The Federal Government considers the constitutional complaints to be inadmissible or at least unfounded.

Key considerations of the Senate:

I. The constitutional complaints are mostly admissible but only partially well-founded.

The fact that the Offshore Wind Energy Act introduces a fundamentally revised legal framework for the approval of offshore wind farms and that any positions reached in the procedural process under the previously applicable law, including permits and planning approval, are no longer legally valid is compatible with Art. 14(1) GG and does not violate Art. 12(1) GG either. However, the quasi-retroactive effect inherent in the introduction of the new legal regime is not entirely compatible with the protection of legitimate expectations (Art. 2(1) in conjunction with Art. 20(3) GG). Yet there is no violation of Art. 3(1) GG.

1. Art. 14(1) GG is not violated, as the challenged provisions do not touch upon protected property rights. Neither a permit granted pursuant to the Offshore Installations Ordinance nor a position reached in the procedural process under the previously applicable law constitute property within the meaning of Art. 14(1) GG. In its judgment of 6 December 2016 on the nuclear phase-out (Decisions of the Federal Constitutional Court, Entscheidungen des Bundesverfassungsgerichts – BVerfGE 143, 246), the Federal Constitutional Court has already denied that the approval of installations can be considered property because by granting an approval it is merely established that the requirements for approval are met. This also applies to permits and planning approval granted pursuant to the Offshore Installations Ordinance. As an approval that has already been granted does not constitute property within the meaning of the Basic Law, it is even clearer that a position reached in the procedural process that comes before an approval cannot constitute such property either.

The complainants’ investments as such also do not constitute property within the meaning of Art. 14(1) GG. Seen individually, they are merely expenses. Subject to certain conditions, Art. 14(1) GG protects the legitimate expectation that the legal situation serving as a basis for investing in property will not change, yet this requires a legal position that can constitute property, which does not exist in the present case.

2. The fact that the provisions of the Offshore Wind Energy Act only permit the operation of offshore wind farms in cases where a tender has been accepted and thus simultaneously remove all legal validity of positions reached in the procedural process and of any approval of wind farms granted under the old law, does not violate Art. 12(1) GG either.

a) It does interfere with the freedom to work as an offshore wind farm operator, which is protected by Art. 12(1) GG, but the interference is justified.

The Offshore Wind Energy Act serves the legitimate aim of climate and environmental protection. In particular, it aims to make the expansion of offshore wind energy more economically viable and to increase certainty in the planning of offshore wind farms through improved coordination and administration. The fact that the operation of wind farms is only permissible if a tender is accepted and if the authorities grant approval for the specific case is both suitable and, measured against Art. 12(1) GG, necessary to achieve the purpose of the law. Less intrusive means that are equally effective are not apparent.

In this respect, the interference is also not disproportionate for reasons arising from the protection of legitimate expectations. A transitional legal framework can be required under Art. 12(1) if it will become impermissible to pursue an occupation that has previously been pursued in a permissible manner. Yet this is accommodated sufficiently through § 77(1) first sentence no. 1 of the Offshore Wind Energy Act; notwithstanding the fact that the complainants do not satisfy the requirements of that provision. However, in principle Art. 12(1) GG does not protect legitimate expectations on the basis of frustrated investments that have been made in view of future business activities.

b) Insofar as the challenged provisions of the Offshore Wind Energy Act concern businesses whose activities are restricted to the development of wind farms that could later gain approval without any intent that they themselves will operate them in the future, Art. 12(1) GG does not require the protection of legitimate expectations either.

3. However, the introduction of a new legal regime through the challenged provisions of the Offshore Wind Energy Act is not entirely compatible with the general principle of the protection of legitimate expectations under Art. 2(1) in conjunction with Art. 20(3) GG. The provisions have a quasi-retroactive effect that is partially not justified under constitutional law.

a) Art. 2(1) in conjunction with Art. 20(3) GG contains a general principle of the protection of legitimate expectations which complements the specific protection of legitimate expectations contained within the freedoms of the Basic Law. Yet not each and every change of the law stipulates a question as to the protection of legitimate expectations under constitutional law. Where such change is foreseeable, the expectation that the law will not change is unwarranted from the point in time at which it became foreseeable and does not merit protection under constitutional law. Even where changes to the law are not foreseeable, they must generally be anticipated. The protection of legitimate expectations under constitutional law does not go as far as to generally protect individuals addressed by the new law from any situation where their expectation that the legal situation will not change is not met. Otherwise, the legislator who must be committed to the common good would be prevented from exercising its democratic responsibility in key areas. A merely general expectation that the currently applicable law will not ever change in the future does not merit any special protection under constitutional law unless exceptional aspects that merit protection also come into play. Retroactivity can give some indication of whether exceptional aspects that merit protection exist, i.e. that there is not a merely general expectation that the currently applicable law will not ever change in the future. The constitutional limits to laws with retroactive effect which are derived from Art. 2(1) in conjunction with Art. 20(3) GG do not only apply in the context of tax law but are also applicable to other areas of law. A distinction must be drawn between laws with a quasi-retroactive effect and laws with a real retroactive effect (echte Rückwirkung). A legal provision has a real retroactive effect if it retrospectively makes changes to a circumstance that has already come to a conclusion. Provisions that have a real retroactive effect are generally impermissible under constitutional law. A legal provision has a quasi-retroactive effect where it has a future impact on legal relationships and circumstances that have not yet come to a conclusion and thereby removes any legal validity of the affected legal position. In principle, provisions that have a quasi-retroactive effect are permissible under constitutional law. However, limits to such permissibility can arise from the principle of proportionality. These limits have only been exceeded where the quasi-retroactive effect is neither suitable nor necessary to achieve the purpose of the law, or alternatively, where the affected individuals’ interest in the law remaining unchanged outweigh the legislator’s reasons for changing the law.

b) The challenged provisions have a quasi-retroactive effect. This effect is not entirely justified under constitutional law. It does serve a legitimate purpose and is suitable for achieving the pursued purpose. However, the challenged provisions are not absolutely necessary as the legislator could have used equally suitable but less intrusive means to achieve the intended purposes. For example, where tenders for the relevant site are accepted by 31 December 2030, the legislator could require the complainants to turn over their data and documents pursuant to § 41 of the Offshore Wind Energy Act and in return provide financial compensation for any necessary planning and site investigation expenses. Thereby, the extent to which the complainants’ expectations are not met would be lessened.

For the rest, however, the provisions are proportionate in the narrow sense. An individual’s expectation that the law will not change does merit protection. In particular, the complainants can rely on the fact that, under the old law, planning offshore wind farms was incentivised through affording certain priority positions. However, permits could have ceased to have effect even if the old law had continued to apply, given that decisions on approval are subject to a general time limit and given the general delay in establishing grid connection. At the same time, considering the complexity of the processes for building a wind farm and for grid expansion which need to be coordinated, it was foreseeable that fundamental legal changes might be introduced to move towards a market-oriented approval process that ensures improved coordination. The legislator balanced interests against one another and consequently gave precedence to the interests of the general public which are pursued by the quasi-retroactive provision; the result of this balancing is not objectionable under constitutional law – especially since the provisions at issue introduce a fundamental change of system – which means that it must be assumed that the legislator has considerable leeway when designing the transition. The change of law serves legitimate interests of the general public that, in principle, can only be reached if the complainants forgo the position they have reached in the procedural process. In § 77(1) first sentence no. 2 of the Offshore Wind Energy Act, the legislator also created a transitional legal framework for incomplete wind farms that is applicable if they start operating by the end of 31 December 2020 and if grid connection has been confirmed unconditionally or if they have been assigned grid capacity and if grid connection is therefore likely. Thereby, account is taken of the fact that the project developer’s expectation that the law will not change is more worthy of protection where grid connection is anticipated and it is therefore more likely that a project will be completed. In comparison, the complainants’ expectation that the law will not change is less worthy of protection.

4. The challenged provisions do not violate Art. 3(1) GG. The distinction between projects on the basis of their status that underlies the definition of “existing projects” in § 26(2) no. 2a of the Offshore Wind Energy Act does not give rise to unequal treatment of the complainants in comparison with businesses whose projects are considered existing projects under §§ 26 et seq. and § 39 of the Act and might thus be continued. Furthermore, the fact that one of the complainants has been treated in the same way as other developers whose projects had also been set out to be in Zone 3 but who had not received a permit does not constitute equal treatment that would violate Art. 3(1) GG.

II. As a result of the violation of the Constitution that has been identified, the Federal Constitutional Court does not declare that the Offshore Wind Energy Act is void, but it merely finds that it is incompatible with the Basic Law and orders that it will continue to apply until new provisions have been enacted. This is because measured against the legal framework as a whole the deficiency that is objectionable under constitutional law only concerns a marginal area.