11

Fox News' April 28, 2022 Germany drops opposition to Russia oil embargo: report includes the following:

The reversal from Germany – which had been one of the main opponents of the EU severing its oil and gas trade with Russia – comes after Berlin struck a deal with Poland to import oil by way of one of its Baltic Sea ports, The Wall Street Journal reports.

On Wednesday, Germany’s representatives to the EU lifted its objection to a Russian oil embargo pending the country has enough time to find alternative supplies, according to two German government officials who spoke to the newspaper.

and ends with

In the deal it reached with Poland, Germany will be able to receive oil from exporters docking at the Baltic Sea port of Gdansk, which is connected to a Russian pipeline that funnels crude into a refinery operated by Russian oil company Rosneft in Schwedt, Germany, The Wall Street Journal reports.

The Schwedt refinery provides thousands of jobs for its region – and in the event Rosneft refuses to process non-Russian imports, Germany could place the refinery under state management, the newspaper also reported.

It's that last sentence in bold that caught my attention and interest. The federal government taking over control of a business or even a part of it is a notable event in a democracy where capitalism and free markets are critical to its economy. So I'd like to ask:

Question: Does Germany have much experience putting industries or facilities "under state management" if they don't cooperate? Is there provision for this in the constitution? Is there precedent?


Potentially related:

Reuters March 22, 2022 Germany puts Rosneft's purchase of Schwedt refinery stake (under review

FRANKFURT, March 21 (Reuters) - Germany has put Russian oil group Rosneft's (ROSN.MM) planned purchase of a 37.5% stake in the PCK Schwedt refinery under review, a spokesperson for the economy ministry said on Monday.

"Concerning the takeover of additional shares in the PCK (Schwedt) refinery by Rosneft, an investment review process has been launched," the spokesperson said in response to an enquiry.

The deal, agreed in November, would raise Rosneft's stake in the east German refinery to 91.67%, with Italy's Eni (ENI.MI) holding 8.33%.

5
  • 11
    You might be surprised what kind of laws you'd still find "on the books" from the Cold War era. Logistically, Germany is no longer prepared to fight the Soviets at the Fulda Gap, but legally they merely stopped to use the laws for that. The draft is just suspended, for instance.
    – o.m.
    Apr 29 at 5:51
  • 6
    Only for transcript, there is no Fulda Gap anymore. Now it is Suwalki Gap and there a bunch of nations are prepared. Apr 29 at 10:38
  • 1
    @Allerleirauh, no Soviets, either. But Germany would need much longer to deploy to Suwalki than it used to have taken to react to Soviets in the Fulda Gap.
    – o.m.
    Apr 29 at 14:50
  • 2
    "Does Germany have much experience putting industries or facilities "under state management"": During WW2, certainly. Read about the US etc. companies in Germany, e.g. archives.gov/research/holocaust/articles-and-papers/…. (The US did the same to German companies.) I'm guessing your Q is mostly about post-WW2 era though.
    – Fizz
    Apr 30 at 8:34
  • @Fizz yes, you are right. While not explicit, asking for "provisions for it in the constitution" sort-of at least suggests...
    – uhoh
    Apr 30 at 11:44

3 Answers 3

25

Germany already put Gazprom Germania under state management on April 4. You can see the official order here, this was ordered by Robert Habeck, the minister for the economy and climate. The order refers to the "§ 6 des Außenwirtschaftsgesetzes" for justification.

The trigger for this was that the Gazprom Germania ownership was transferred to a different entity which then tried to liquidate Gazprom Germania. All of this would have required notification and approval from the German government because this concerns critical infrastructure. The German government was not notified and not asked for approval, additionally there were concerns that Gazprom Germania would become insolvent due to the current situation, endangering the gas supply.

This law lists several cases where measures like this would be justified. The major ones are ensuring essential security interests of Germany, preventing disruption of peace, preventing disruption of foreign affairs or ensuring public order and security.

The supply of gas is critical for both German industry and for heating private homes. So this case seems pretty obviously covered by the law, and I'm not aware that there was any kind of serious objection to this act.

There is also article 15 of the Grundgesetz (German constitution):

Land, natural resources and means of production may, for the purpose of nationalisation, be transferred to public ownership or other forms of public enterprise by a law that determines the nature and extent of compensation. With respect to such compensation the third and fourth sentences of paragraph (3) of Article 14 shall apply, mutatis mutandis.

So the state could also take ownership of these companies under some conditions. This would raise the question about compensation, but I'm not sure how this would work in this particular case.

6
  • 8
    Article 15 would also be applicable if a plot of land is needed to build a highway, say. The "market value" of the last unsold square yard in the path of an infrastructure project would be astronomical, but farmers would get compensated by the value of a similar plot of land, not needed for a highway.
    – o.m.
    Apr 29 at 4:11
  • 1
    "I'm not sure how this would work in this particular case." By legal action. You would just sue and say, I did not get a fair compensation. Then the courts would have to decide that is how much that would be.
    – Trilarion
    Apr 29 at 12:34
  • 1
    The question was about the enforced state management of the oil refinery PCK Schwedt, not about the gas company Gazprom Germania.
    – ccprog
    Apr 29 at 17:23
  • 4
    @ccprog the question asked for previous cases and precedents, and this one is pretty close as it's related to the same overall conflict. Apr 29 at 17:59
  • This is an outflow of a general confusion of these two cases in the press. Since they were handled almost always together, I was under the - erroneous - impression the BMWK had already taken steps to secure PCK, just like Gazprom Germania. But as it turns out, the decision about PCK is still pending.
    – ccprog
    Apr 29 at 19:40
9

The Gesetz zur Sicherung der Energieversorgung (Energy security law) already lists a number of things the government can order energy companies to do. Among them (listed in §1) are orders about production, storage, distribution and prices of oil and gas products and the means of their production. This week, the coalition parties in the Bundestag have introduced a proposal to amend that law. In a new section (§§ 17-23), the government would get the right to place a company under trust management or to force expropriation to secure energy supply:

Um die Versorgungssicherheit zu gewährleisten, wird die Möglichkeit einer Treuhandverwaltung über Unternehmen der kritischen Infrastruktur und als Ultima Ratio auch die Möglichkeit einer Enteignung geschaffen.

Trust management would be allowed if otherwise some part of the critical infrastructure was at risk to not fulfill its role for the functioning of society in the energy sector, and an "impairment of supply security is threatened":

§ 17 (1) Ein Unternehmen, das selbst oder durch verbundene Unternehmen im Sinne von § 15 des Aktiengesetzes kritische Infrastrukturen im Sinne von § 2 Absatz 10 des BSI-Gesetzes im Sektor Energie betreibt, kann unter Treuhandverwaltung gestellt werden, wenn die konkrete Gefahr besteht, dass ohne eine Treuhandverwaltung das Unternehmen seine dem Funktionieren des Gemeinwesens im Sektor Energie dienenden Aufgaben nicht erfüllen wird, und eine Beeinträchtigung der Versorgungssicherheit droht.

Trust management is limited to a six month period, but can be prolonged in steps of six months.

Expropriation could happen if a temporary trust management is not suitable and if it is "required to maintain supply security" and the functioning of society in the energy sector:

$ 18 (4) Die Enteignung ist nur zulässig, wenn sie zur Sicherung des Funktionierens des Gemeinwesens im Sektor Energie und zur Aufrechterhaltung der Versorgungssicherheit erforderlich ist und eine zeitlich begrenzte Treuhandverwaltung nach § 17 nicht hinreichend geeignet ist, diesen Zweck zu erfüllen.

The detailed justification points back to a expropriation law from 2009 that was introduced for the case of the Hypo Real Estate bank:

Die §§ 18 bis 23 greifen in Inhalt und Regelungssystematik auf das Gesetz zur Rettung von Unternehmen zur Stabilisierung des Finanzmarktes (Rettungsübernahmegesetz) vom 7. April 2009 zurück.

(In the end in that case, no formal expropriation was neccessary for a state takeover. Instead the combination of a buyout, a capital enlargement and a squeezeout of the remaining shareholders were enough.)

9

On a more general note, the German de facto constitution, its Grundgesetz, does not at all prescribe or require a capitalist economy (an assumption that appears to underly your question, if I read it correctly).

At the time of its inception in the late 1940s, the Social Democrats, who today are very much centrist, were politically much more left-wing, more so than what Americans today would call, in applause or abjection, "socialist" as represented by the extreme left wing of the Democratic Party. The Social Democrats had half the seats in the constitutional assembly. And even the conservative politicians were fairly left by today's standards.

Germany's political course was very much uncharted; it wasn't even clear that de facto two separate, even hostile nations would emerge. An in-depth discussion is off-topic in this context but only in 1959 the Social Democrats performed what amounted to a programmatic about-face and embraced a — socially tamed — capitalism, the social market economy.

That said, the foundation of the German legal system is agnostic regarding the economic order as long as it guarantees private property, limited by applicable laws. It strikes a balance between this and public welfare as evident in the Art. 15 GG quotes in Mad Scientist's answer. In particular, it does not provide an unrestricted power of disposal over one's property. On the contrary, it gives the government the authority to expropriate "for the purpose of nationalization", which allows the implementation of outright socialism or at least "state capitalism".

This balance between private property and public welfare, which the Grundgesetz leaves open so that future generations can find their own sweet spot, is condensed in the second sentence of Art. 14. The first sentence acknowledges the bare guarantee of private property, but then comes this remarkable, sweeping statement:

Eigentum verpflichtet.

(Private) property obligates. Period. No specifics. There is no privilege without duty. True, the next sentence can be understood as an elaboration: "Its use shall at the same time further public welfare." But still: There is this period after the first sentence. It stands alone, as a core principle of the constitution.

4
  • No, I didn't use "require" in the question at all. I simply suggested that at present Germany happens to be a capitalist economy. One can re-read it or simply refer to: "It's that last sentence in bold that caught my attention and interest. The federal government taking over control of a business or even a part of it is a notable event in a democracy where capitalism and free markets are critical to its economy." Perhaps a different question that actually asks about capitalism would be a petter place for this answer?
    – uhoh
    Apr 29 at 18:52
  • So I've only suggested that in a free-market economy, it is notable when a government takes "over control of a business or even a part of it".
    – uhoh
    Apr 29 at 18:57
  • @uhoh "a democracy where capitalism and free markets are critical to its economy" seemed to link democracy and capitalism, a link that, as I pointed out, is not set in stone in the German constitution. If you didn't mean that the question seems almost moot: Yes, indeed, the government is free to expropriate and nationalize with adequate compensation. I think my contribution is still valuable because it points that out, thus answering to your puzzlement. Apr 29 at 21:46
  • There's nothing in the question about it being set in stone, it's simply mentioned as something that happens to be true at this point in time.
    – uhoh
    Apr 29 at 22:29

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .