A company court has ordered the Italian government to pay more than £210million to British oil company Rockhopper as compensation for a ban on offshore oil drilling.
The Rockhopper case was launched after the Italian government banned oil exploration and production within 12 miles off the Italian coast in 2015, blocking the company’s planned Ombrina Mare oilfield.
Following a closed court operating under the Energy Charter Treaty (ECT), which was criticized for its lack of transparency and operating outside of national court systems, a panel of judges ruled unanimously agreed on Wednesday that Italy had defaulted on its obligations to Rockhopper, allowing a compensation payment of around six times more than the estimated £33million it had invested in the project.
The ECT was developed to protect the profits of European energy companies during the collapse of the Soviet Union in the early 1990s. Under the ECT, companies can sue governments if they make political decisions that could reduce their profits. This poses an obvious challenge as governments seek to reduce their fossil fuel emissions.
Treaty payouts could reach $1.3 billion by 2050, according to Yamina Saheb, an ECT official-turned-whistleblower who is also the lead author of a group paper United Nations Intergovernmental Panel on Climate Change (IPCC) Working Group on Climate Change Mitigation.
Saheb said Wednesday’s panel decision was “exactly in line with my previous projection and confirms its accuracy.”
“If policymakers want to make the EU climate neutral, they must withdraw from the Energy Charter Treaty and stop protecting fossil fuel investments,” she said. “The choice is between climate neutrality and the treaty. We cannot have both.
A spiteful debate over the treaty came to a head in June, when a ‘modernisation’ proposal that would continue to protect fossil fuel investments in the EU and UK for 10 years was accepted in principle by its signatories.
Laurence Tubiana, one of the architects of the Paris climate agreement and chief executive of the European Climate Foundation, said: “This new verdict is another example of why it is imperative that the EU and its Member States withdraw from the Energy Charter. processed immediately. The proposed ECT reforms are inconsistent with the Paris Agreement, and withdrawal is the only fair and just path so that neither the planet nor taxpayers have to pay for dirty investments.
A spokesperson for Rockhopper, who asked to remain anonymous, said the court’s decision “was based on the loss of profit rather than the amount invested, so [the £33m] is not really the metric”.
The official declined to comment on the implications of the decision for future climate action. A recent IPCC reportwhich Saheb has been working on, warned that the “regulatory chill” of payments under deals like the ECT could delay or thwart the fossil fuel phase-out.
A statement by Rockhopper Managing Director Sam Moody said, “This positive step builds on our recent transaction with Navitas and while work remains to be done on Sea Lion, we believe that after the price is collected it will bring a material contribution on our part. development costs.
sea lion is an oil project in the Falkland Islands, involving both Rockhopper and Navitas. In the aftermath of Wednesday’s decision, shares of Rockhopper jumped 90% to 16p.
The International Energy Agency has said any new fossil fuel projects would be incompatible with keeping temperatures below the global climate target of 1.5°C. But while energy prices and Supply fears have increased with the war in Ukraine, new fossil fuel projects are meeting less opposition than they were 12 months ago.
Cleodie Rickard, business activist at Global Justice Now, said: ‘It’s a travesty that an oil company like Rockhopper can get this massive payout through secret tribunals under the Energy Charter Treaty. Fossil fuel companies are making obscene profits in the cost of living crisis and now they also want to make more money when governments take action to limit something like offshore oil drilling. This case will have a chilling effect on climate action, as climate scientists have warned.
“We need to get rid of this murky legal system that poses a threat to the climate – not in 10 years as governments are now proposing, but now. Our world is burning, and we must cancel climate-bombing fossil fuel projects without delay. The UK and countries in Europe should exit the Energy Charter Treaty in a coordinated withdrawal and end the risk of being sued.