Applications of the Free States of Saxony and Thuringia in dispute between the Federation and the Länder regarding the costs to remediate environmental damage caused by state-owned enterprises of the former German Democratic Republic are inadmissible

Press Release No. 113/2023 of 06 December 2023

Order of 15 November 2023 - 2 BvG 1/19, 2 BvG 1/21

In an order published today, the Second Senate of the Federal Constitutional Court dismissed as inadmissible applications of the Free States of Saxony and Thuringia made in two disputes with the Federation. The applications were primarily aimed at obligating the Federation to further co-fund costs to remediate environmental damage caused by formerly state-owned enterprises of the German Democratic Republic (GDR).

In the course of the privatisation of former state-owned GDR enterprises following German reunification, investors were often released from liability for environmental damage caused prior to 1 July 1990. To finance this, the Federation and the East German Länder, including Saxony and Thuringia, concluded an administrative agreement governing the allocation of costs between the Federation and the Länder. For certain Länder, this agreement was modified by way of so-called general agreements providing for a lump-sum settlement of the Federation’s future share of the anticipated remediation costs. In the event the costs prove to be higher than anticipated, the general agreements provide – under specific circumstances – for negotiations on the allocation of the additional costs. According to the calculations made by Saxony and Thuringia, more funds than previously anticipated are necessary to remediate the contaminated sites. The Federation declined to negotiate.

The applications of the Free States of Saxony and Thuringia are inadmissible. They have failed to sufficiently demonstrate standing to file an application in proceedings concerning a dispute between the Federation and the Länder. They have not demonstrated a constitutional obligation of the Federal Republic of Germany to bear (part of) the future costs for the remediation of contaminated sites. No such obligation has been substantiated, either with regard to Art. 104a(1) of the Basic Law (Grundgesetz – GG) or with regard to unwritten constitutional principles.

Facts of the Case:

As part of the process of German reunification, former state-owned GDR enterprises were transferred to the federal trust agency (Treuhandanstalt or Treuhand) for the purpose of privatisation. In many cases, the Treuhand agreed to release investors from liability for past environmental damage caused by the state-owned enterprises. However, this release was only to apply in cases where there was no possibility of a statutory exemption from liability, in particular pursuant to Art. 1 § 4(3) of the Environmental Framework Law (Umweltrahmengesetz – URaG). In 1992, the Federation and the East German Länder concluded the Administrative Agreement on the Funding of the Remediation of Contaminated Sites (hereinafter: the Administrative Agreement). This provides for, inter alia, the distribution of costs incurred as a result of the release from liability for the remediation of contaminated sites between the Treuhand (60% or 75 %) and the respective Land (40% or 25%). Due to practical difficulties in the execution of the Administrative Agreement, some Länder, including the Free States of Saxony and Thuringia, concluded general agreements with the Treuhand, which had since been renamed the Federal Institute for Special Tasks Arising from Unification (Bundesanstalt für vereinigungsbedingte Sonderaufgaben).

The general agreement with the Free State of Saxony was concluded on the basis of estimated remediation costs in the total amount of EUR 350 million. If, by 2018, it was subsequently ascertained that the costs would significantly exceed the original estimate, the parties were to negotiate on the allocation of the additional costs. In October 2018, the Free State of Saxony informed the Federal Ministry of Finance and the Institute for Federal Real Estate (the legal successor of the Federal Institute for Special Tasks Arising from Unification) that the previously-anticipated cost threshold would be reached by 2027 and that there would be additional costs in an approximate amount of EUR 234 million and requested renegotiations. The Federal Ministry of Finance and the Institute for Federal Real Estate declined.

The general agreement with the Free State of Thuringia was concluded on the basis of estimated remediation costs in the total amount of 1.3 billion German Marks (Deutsche Mark). In the event these costs were significantly exceeded within a period of 10 years, the parties were to negotiate on the allocation of the additional costs. According to calculations by the Free State of Thuringia, this threshold was exceeded in 2017. After extensive correspondence, the Free State of Thuringia submitted a final request to the Federal Ministry of Finance and the Institute for Federal Real Estate to enter into negotiations. There was no response to this request.

Key considerations of the Senate:

The applications are inadmissible. The Free States of Saxony and Thuringia do not have standing to file an application in the proceedings at hand.

I. The letter of the Federal Ministry of Finance of 9 November 2018 expresses the (final) refusal of the Federation to bear additional costs for the remediation of contaminated sites in Saxony or further negotiate the issue. This does not, however, amount to a violation or the direct threat of a violation of the rights and obligations conferred on the Länder by the Basic Law. The Free State of Saxony does not demonstrate a substantive relationship governed by constitutional law and consequently no duty that could be derived from the Constitution that would obligate the Federation to bear the costs as requested. No such obligation has been sufficiently substantiated, either with regard to Art. 104a(1) of the Basic Law or with regard to unwritten constitutional principles. 

1. a) Pursuant to Art. 104a(1) of the Basic Law, the Federation and the Länder shall – insofar as the Basic Law does not otherwise provide – separately finance the expenditures resulting from the discharge of their respective responsibilities. The allocation of financial responsibility is linked with the administrative responsibility. 

The Free State of Saxony has not sufficiently substantiated that the Basic Law exclusively allocates to the Federation the administrative responsibility and therefore also the financial responsibility with regard to Art. 1 § 4(3) of the Environmental Framework Law. When determining administrative responsibility in the context of the Environmental Framework Law, it is not decisive that the Treuhand contractually agreed in many cases to release the respective investor from liability for contaminated sites. A release from liability under private law does not establish an auxiliary competence for the release from liability under public law pursuant to the Environmental Framework Law, which is carried out by the Land authorities. The same holds true insofar as the Free State of Saxony seeks to derive an administrative responsibility on the part of the Federation by virtue of the nature of the matter in question. It has not been substantiated why the purpose of the law cannot be accomplished by an individual Land.

b) Even if one assumes that there is an overlap in the responsibility of the Federation and the Länder for the release from liability for contaminated sites, the Free State of Saxony fails to demonstrate a constitutional claim to a full or partial reimbursement of costs pursuant to Art. 104a(1) of the Basic Law. This provision merely lays down the general apportionment of the burden of expenditures between the Federation and the Länder in relation to their respective responsibilities, without giving rise to a claim that one or the other bear specific costs. The Administrative Agreement and the general agreement do not affect the general apportionment of expenditures. The agreements concern the specification of the allocation of tasks and burdens proportionate to the respective shares in the discharge of the responsibility to ‘release investors from liability for contaminated sites’. They do not give rise to a relationship between the Free State of Saxony and the Federation that is governed by constitutional law. Based on their content and subject matter, the agreements do not go beyond the regulation of matters of administrative law. 

2. Insofar as the Free State of Saxony claims a violation of the principles of loyalty and equal treatment within the federal order pursuant to Art. 20(1) of the Basic Law because the Federal Institute for Special Tasks Arising from Unification had concluded different agreements on the assumption of remediation costs for contaminated sites with the respective Länder, it does not demonstrate a substantive relationship governed by constitutional law either. In this respect, only the applicable standard of review can be inferred from constitutional law. However, the Free State of Saxony’s claim to modify the agreement is not founded in a constitutional obligation, but instead is derived from non-constitutional agreements. In a dispute between the Federation and the Länder, the applicant can only invoke these ancillary constitutional principles of equal treatment and loyalty within the federal order if the legal relationship stems directly from the Constitution. This is not the case here.

II. The dispute between the Federation and the Free State of Thuringia is based on the same points of law. The Free State of Thuringia also cannot assert standing. Thuringia has likewise failed to demonstrate that Art. 104a(1) of the Basic Law or the principles of loyalty within the federal order and equal treatment of the Länder give rise to an obligation of the Federation to bear costs.