Italy: Oil firm Rockhopper wins £210m payout after being banned from drilling
A corporate tribunal has ordered the Italian government to pay more than £210m to the UK oil company Rockhopper as compensation for an offshore oil drilling ban.
Rockhopper’s case was launched after the Italian government banned oil exploration and production within a 12 mile-limit off Italy’s coast in 2015, scotching the company’s planned Ombrina Mare oilfield.
Following a closed-door tribunal operating under the energy charter treaty (ECT), which has been criticised for its lack of transparency and operating outside national court systems, a panel of judges unanimously agreed on Wednesday that Italy had breached its obligations to Rockhopper, entitling it to a compensation payout of about six times more than the estimated £33m it had invested in the project.
...Under the terms of the ECT, companies can sue governments if they make policy decisions that could cut profits. This poses a clear challenge as governments seek to reduce their fossil fuel emissions.
Payouts under the treaty could reach as much as $1.3tn by 2050, according to Yamina Saheb, an ECT official turned whistleblower, who is also the lead author of a UN Intergovernmental Panel on Climate Change (IPCC) working group paper on climate mitigation.
A rancorousdebate about 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 agreed in principle by its signatories.
Laurence Tubiana, one of the architects of the Paris climate agreement and the chief executive of the European Climate Foundation, said: “This new verdict is yet another example of why it is imperative that the EU and its member states must withdraw from the energy charter treaty immediately. The proposed ECT reforms are incompatible with the Paris agreement, and withdrawal is the only just and equitable route forward so that neither the planet nor taxpayers have to pay for dirty investments.”
A spokesperson for Rockhopper who asked to remain anonymous said that the tribunal’s award “was on the basis of lost profits rather than the su invested, so that [the £33m] is not really the metric”.
The official declined to comment on the ruling’s implications for future climate action. A recent IPCC report, which Saheb worked on, warned that “regulatory chill” from payouts under agreements like the ECT could delay or stymie fossil fuel phase-outs.
A statement by Rockhopper’s chief executive, Sam Moody, said: “This positive milestone builds on our recent transaction with Navitas and while work still needs to be done on Sea Lion, we believe after collection of the award, it will make a material contribution towards our share of the development costs.”
Cleodie Rickard, a trade campaigner at Global Justice Now, said: “It is a travesty that an oil company like Rockhopper can get this massive payout through secretive tribunals in 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 actually 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 shadowy legal system that poses a threat to the climate – not in 10 years’ time as governments are proposing at the moment but right now. Our world is burning and we need to be cancelling climate-bomb fossil fuel projects without delay. The UK and countries across Europe should exit the energy charter treaty in a coordinated withdrawal and put an end to the risk of being sued.”