Luther

Bringing a closely watched treaty claim against the Netherlands over its phase-out of fossil fuels

One of the founding fathers of the German Arbitration Institute, Martin Luther, established this firm in Hamburg in 1950. Originally a boutique corporate firm, it began to receive international arbitration work after a merger with Arthur Andersen’s local legal division.

After the implosion of Arthur Andersen, Luther formed an association with Ernst & Young. The firm ended that relationship in 2006 but retained an international focus. Its reputation developed in investment arbitration after it became one of the first firms in the country to be instructed on a treaty claim (Inmaris v Ukraine).

Luther’s arbitration practice has a heavy focus on energy disputes. Swedish state-owned energy company Vattenfall instructed it for the first ever ICSID case against Germany, and later for a second ICSID claim, reportedly worth up to €7 billion, over the state’s decision to phase out nuclear power in the wake of Japan’s Fukushima disaster. Both cases ended in settlement, the second one worth over €1 billion for Vattenfall.

Hamburg-based Ulrich Theune established the arbitration practice but retired as a partner in 2012 to focus on arbitrator work, though he continues to support the firm on select cases. The practice is now chaired by Richard Happ in Hamburg, who has been at the forefront of much of the investment treaty work, including acting as lead counsel for Vattenfall.

Jutta Wittler in Cologne specialises in construction, and Borbála Dux – previously with Freshfields – joined in 2018 as a partner in Cologne, where her practice includes post-M&A disputes. Christoph von Burgsdorff in Hamburg, who became a partner in 2012, focuses on transactional and joint venture disputes.

The firm is one of the founding members of the European Federation for Investment Law and Arbitration, a Brussels-based lobby group set up to promote the benefits of investor-state dispute settlement and counter the negative press it has received in recent years. It also supports university education for dispute resolution, public international law and investment law, having helped to establish the Center for International Dispute Resolution at Bucerius Law School in 2018.

Who uses it?

A mixture of German and international clients, particularly from the energy and infrastructure sectors. In addition to Vattenfall, it is acting for E.ON in a €300 million claim against Spain – one of numerous ECT claims relating to the state’s renewable energy reforms.

It has also acted for Greek petroleum company Mamidoil, Norway’s Statkraft, Italian engineering company Ansaldo Energia, Molinari and PreussenElektra.

Network

The core of the team is in Hamburg, with others in Cologne and Düsseldorf. The wider firm has seven other German offices, as well as other outposts in – among others – Bangkok, Brussels, Jakarta, London, Luxembourg, Shanghai, Singapore and Yangon in Myanmar.

Track record

Although it is more visible in investor-state cases, several of the firm’s big victories have been in commercial arbitrations. In 2018, Luther helped E.ON and its subsidiary PreussenElektra largely prevail in an ICC case against Belgium’s Electrabel, a subsidiary of French energy group Engie. A Geneva-seated tribunal held that E.ON was not obliged to pay a €321 million tax on nuclear power in Belgium and ordered Electrabel to pay around €11 million.

As part of a co-counsel team, Luther helped Italian client Ansaldo prevail in an ICC arbitration with Siemens over the use of heavy-duty gas turbine technology. The tribunal upheld Ansaldo’s right to use the technology under a winding-up agreement and rejected Siemens’ US$436 million claim.

The firm successfully represented a German automotive supplier in a VIAC arbitration against a Chinese joint venture, and achieved wins in two CIETAC arbitrations between a German electrical components supplier and a Chinese listed company in the solar sector.

The settlement of the second Vattenfall case was big news. It was one of the highest-profile investor-state arbitrations of recent years, concerning Germany’s decision to hasten the phase-out of nuclear energy and reportedly worth up to €7 billion. In 2021, the parties announced an agreement under which Germany will pay Vattenfall €1.4 billion to settle the case.

Recent events

Luther’s expertise in energy-related disputes has landed it an instruction representing German energy giant RWE in the first ever ICSID claim against the Netherlands – a case concerning the phase-out of coal power plants as part of climate change legislation. The arbitration is being seen as a test case on how investment tribunals will rule in disputes concerning states’ right to regulate as they try to phase out fossil fuels. 

Another energy-related instruction sees Luther acting for regular client E.ON in an ICSID claim against Spain over regulatory changes in its renewable energy sector. An award is expected imminently.

Luther promoted a new counsel, Tim Rauschning, who worked on the Vattenfall and RWE matters, and a new of counsel, Sebastian Wuschka.

Client comment

Stefan Grassee, legal counsel at E.ON, praises Luther’s “strong expertise” in investment arbitration, “a niche that not many law firms of their size can provide”. Rauschning’s advice is “always comprehensive and prompt”; he and Happ offer “helpful, outside-the-box thinking”.

A third-party funder with whom Luther has worked says the firm “clearly stands out among its peers regarding the quality of their advice”, adding that Rauschning “is definitely a name to watch out for”.