Report: How shadow courts threaten the climate
'How shadow courts threaten the climate', 3 August 2021
"The central Italian region of Abruzzo reaches from the peaks of the Apennines all the way down to the Adriatic coast. The Discover Italy tourism website rhapsodizes over its natural reserves, famous for wildlife, national parks and miles of stunning Trabocchi coastline. It’s described as the ‘greenest region’ in the country with sun-seekers flocking there throughout the summer.
But Abruzzo’s natural reserves aren’t limited to beaches and national parks: the Ombrina Mare oil field lies less than 10 kilometres off the coast, discovered in 2007 by the Mediterranean Oil & Gas (MOG) company. In 2014, UK-based Rockhopper Exploration acquired MOG and, along with it, the licence to drill...
...Concerns about damage to the environment and the risk of oil spills were raised alongside questions as to how the Italian government could claim to be reducing the use of fossil fuels while at the same time approving a drilling licence. Faced with such pressure and contradictions, in 2015 the Italian parliament decided not to allow any oil and gas extraction so close to the coast, thus spelling the end of the Ombrina Mare project. Or so they thought.
In 2017 Rockhopper filed a lawsuit against the Italian government, under the little-known Energy Charter Treaty (ECT). A verdict is yet to be announced but Rockhopper is demanding compensation for the investments the company has made to date. Under the ECT, companies can not only claim compensation for lost investments due to a policy change, but also for potential future lost profits – in this case as much as $200-$300 million. Through arbitration in Washington, Rockhopper has requested $275 million – only 29 per cent of this is for money already spent, the rest is for lost profits...
...The ECT was designed in the early 1990s to protect investors from discriminatory practices relating to investments in the energy sector. It was set up after the collapse of the Soviet Union as a way to foster East-West policy co-operation. Many of the former Soviet republics were rich in fossil-fuel reserves but lacked the required investment as they were deemed risky. At the same time, countries in Western Europe were looking to diversify their energy supplies. Out of this was born the Energy Charter. Enforcement of the treaty has generally been through investor-state dispute settlement (ISDS) mechanisms, where investors can sue countries if they feel hard done by.
In the spirit of international agreements of the day, the provisions of the ECT are vaguely worded and open to interpretation. And the majority of these interpretations – 60 per cent of known cases as of October 2020 – have favoured the investor. A process for modernizing the treaty is currently under way and eight of the topics on the list for discussion include the word ‘definition’..."