European court ruling on global fuel fight

11 May 2006

Non-European Union (EU) nuclear operators do not have to ask the European Commission (EC) permission to export uranium enriched within the EU, a European Court of Justice (ECJ) advocate general has concluded. Miguel Poiares Maduro was advising on a complex legal case focusing on the control of Brazilian-owned uranium transferred from Europe to the USA.

This case is being challenged because of the bankruptcy of Nuexco, a US-Swiss company involved in ‘leasing’ the uranium, and the court was asked whether the Brazilians – Industrias Nucleares do Brasil SA (INB) – should have asked the EC permission before exporting enriched uranium, which had been stored in Germany. Poiares Maduro said no: under the Euratom treaty’s article 196, the Brazilians would not be covered by EU rules designed to ensure an adequate supply of uranium in the EU, just because they had business relations with an EU company.

Another issue was whether, under article 75 of the Euratom treaty, any export of uranium is covered by EU controls, if a similar consignment of material is to be returned to the exporter in the future. The advocate general said a liberal rule could be applied: that the material returned does not have to be exactly the same, but merely the same quantity and quality as the original. Judges were also asked what standards article 75 imposed on the state of radioactive material returned to the original supplier. “It is enough that the delivered matters correspond, in quality and quantity, with the provided matters,” said Poiares Maduro.

The case has been brought by INB and Germany’s Siemens AG against the Texas Utilities Electric Corporation, and was referred to the ECJ by a German court, the Oberlandesgericht Oldenburg.

INB, a company charged with securing fuel for Brazilian nuclear power stations, had a long-standing contract with uranium enrichment company Urenco. It delivered enriched uranium to INB in 1984, but the Brazilians contracted Siemens to store the fuel, in Hanau and later in Lingen, both in Germany, using storage facilities run a by a subsidiary.

In 1993, INB decided to resell some of this stock to US nuclear power stations, using a Swiss company Nuexco Exchange AG as a middleman. This involved a complex deal where INB would transfer ownership of the enriched uranium to a buyer, who would be committed to return a similar batch of nuclear fuel at a later date, but paying INB a ‘royalty’ for the use of enriched uranium, which might otherwise not have been available. Under an earlier separate deal however, Nuexco had agreed terms with Swiss bank UBS that it held a potential claim on all its goods and any revenue generated by them, a deal that applied to the uranium secured from INB.

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The Brazilians would not be covered by EU rules designed to ensure an adequate supply of uranium in the EU, just because they had business relations with an EU company

In 1992, the US arm of the Swiss company, Nuexco Trading Corporation (NTC), of Denver, struck such a supply and return deal with the Texas Utilities Electric Corporation, which operated a nuclear power station in Texas. However, in 1995, NTC went bankrupt and, a little more than one year later, a bankruptcy procedure was opened against Nuexco Exchange. As a result, INB has been claiming ownership of transferred uranium, while the Texans and the Swiss bank UBS have claimed they own the stock. Legal action resulted, and in initial proceedings, the Landgericht Osnabrück ruled against INB. The Brazilians appealed, claiming that under Euratom rules, because the uranium had been enriched in the European Union, its ownership had not been transferred to either the Americans or the Swiss company (and its bank).

As a result, the German court asked the ECJ for guidance on the relevant EU law, namely the Euratom treaty. It wanted to know whether its article 86 imposes such obstacles on the transfer of uranium enriched in the EU, that any transfer to a company in a non-EU state could later be declared null and void.

If the court backs its advocate general’s stance (and it does in most cases), the news does not look good for the Brazilians, who will have difficulty using EU law to claim that the uranium was EU-controlled and hence its ownership had not been transferred.

“The circumstance that a company established in a non-member state stores uranium enriched on the territory of the EU, is not enough to label the company as an EU operator under article 196 of the Euratom treaty,” said Poiares Maduro. “The fact that it maintains, with an EU company, a business connection regarding the supply for purposes of enrichment or the storage of enriched uranium,” was not sufficient for Euratom controls to apply, he said.

Other issues thrashed out within this case, which the advocate general has described as “delicate and important,” include the legal definition of uranium enrichment. Poiares Maduro said the “processing, conversion or shaping” of uranium could equal enrichment, under article 75 of the Euratom treaty.


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