In May 2018, Sweden introduced a total ban on uranium mining (see Nuclear Monitor #860). The ban took effect on August 1 that year.
In November 2019, Aura Energy, an Australian mining company active in Sweden since 2006, presented the Swedish government with a notice of arbitration and raised the possibility of a suit for US$1.8 billion dollars in damages, should negotiations fail to result in an agreement.
The damages claimed are based on both what the company says it has invested in prospecting since 2006, and the estimated loss of future revenue from the prospective mine as a consequence of the uranium ban.
The focus of Aura's complaint is not uranium, but the metals (vanadium in particular) that coincide with uranium in the shale at Häggån in north-central Sweden.1 The uranium ban, Aura contends, has made it difficult, if not impossible, to extract any of the accessory minerals.2 In their view the ban therefore amounts to 'indirect expropriation'.
There has been no public information about the case since November. Presumably, due to ongoing conversations between the parties.
The legal framework
The legal foundation for the dispute is Part III, Article 13 of the Energy Charter Treaty (ECT), which Sweden signed in 1998 and ratified in 2001. Like many other multinational free trade agreements these days, the ECT provides for investor-state dispute settlements (ISDS) in a special court, outside the purview of national governments.
Should the dispute proceed to litigation, several factors will be key. State action shall have radically reduced3 the value of the plaintiff's investment, and the action shall not have been visible on the horizon at the time of investment. Furthermore, if the state action was undertaken for the sake of a 'public good', such as public health or the environment, it may be exempt from liability, provided it was executed in an even-handed manner.
Aura's case hardly iron-clad
The case Aura Energy puts forward may be questioned on all three of the above points.
First of all, the ban on uranium mining was clearly motivated by public health and environmental concerns. Unless the measure is deemed "manifestly excessive", that would, by some accounts, put Sweden in the clear.
Secondly, it remains for the plaintiff to demonstrate that they cannot utilize their assets in Häggån. Clearly, the uranium ban complicates operations and cuts into profits ‒ but to what degree? And why would Aura Energy announce plans (in 2019) to introduce their new identity, Vanadis Battery Minerals, on the Stockholm Stock Exchange, if they had no minerals at hand?
Finally, just how clear was the horizon when Aura started prospecting in Häggån? Sweden's absolute ban on uranium mining did come more or less out of the blue. But the situation before the ban was far from 'clear sailing' for anyone interested in extracting uranium.
Although powerless to prevent exploration and prospecting for uranium, local governments in Sweden had had the power to deny rights to actual exploitation ‒ the so-called 'community veto' ‒ since the 1970s. Long before Aura Energy set its sights on Sweden.
Seen in the light of the veto, Aura Energy's plans to mine uranium against the wishes of the residents around Häggån had to be a bit speculative. Either the company presumed they could change local residents' minds, or else manage to obtain some form of dispensation from national authorities. Whichever the case, it was something of a gamble.
Notes:
1. Aura announced a shift in focus from uranium to 'battery metals' like vanadium in its annual report to shareholders in 2018. In early 2019 Aura Energy Sweden changed its name to Vanadis Battery Metals AB. The company plans to seek listing on the Stockholm Stock Exchange.
2. A specification of the estimated volumes of ore at Häggån is presented in Aura Energy's solicited comments on the proposed uranium ban, submitted to the Swedish Environmental Protection Authority in December 2017. The document speaks of a potential total value of US$2 billion in unexploited assets.
3. "Zero or near zero value" is suggested as a threshold for liability in cases of indirect expropriation in a National Board of Trade Sweden document relating to the European-Canadian Trade Agreement (CETA). CETA, like the ECT, complies with the U.S. Model BITS agreement and WTO rules. A lack of jurisprudence specifically relating to ECT leaves this estimate a bit up in the air; on the other hand, the Board is the responsible national authority for such agreements. It should be noted that others, including Kaj Hobér, Professor of International Trade Law at Uppsala University, offer a somewhat less optimistic assessment.
Sources in English:
‒ "'The Right to Regulate' in the Trade Agreement between the EU and Canada – and its implications for the Agreement with the USA", National Board of Trade Sweden, 2005-08-18 Dnr 3.4.2-2015/00532-5, https://www.kommers.se/In-English/Publications/2015/The-Right-to-Regulat...
‒ 'Sweden Sued for $1.8 billion due to environmental regulation'. Handelsgranskaren, 4 Dec 2019, https://handelsgranskaren.se/sweden-sued-for-1-8-billion-due-to-environm...