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26 Aug 2022

Kyla Tienhaara,
Rachel Thrasher,
Thomson Reuters News

Opinion: Rockhopper victory over Italy using Energy Charter Treaty is bad news for climate action

'OPINION: Why an oil firm’s legal win is bad news for climate action', 26 August 2022

"In a decision that could have a chilling impact on climate policy in Europe and around the world, a panel of three arbitrators has unanimously awarded UK-based oil firm Rockhopper more than 190 million euros in compensation for the Italian government’s refusal to grant it an offshore oil concession.

The dispute originates in Italy’s efforts to ban oil drilling within 12 nautical miles of the coast. Local opposition to oil and gas exploration, particularly in the aftermath of the Deepwater Horizon oil spill in the Gulf of Mexico, resulted in an initial halt to offshore oil concessions in 2010. The freeze on concessions was temporarily lifted in 2012. Rockhopper would have been aware of this history when, in 2014, it acquired Mediterranean Oil & Gas (a company with an exploration permit that had been denied a concession) for £29.3 million. In December 2015, the Italian government re-introduced the ban on coastal concessions, and in response, Rockhopper brought a claim against Italy under the Energy Charter Treaty (ECT) in 2017.

The ECT is an investment treaty signed in 1994 that originally aimed at increasing investment in the energy sector. It currently has 50 member countries, predominantly in Europe. Like other investment treaties, it includes the highly controversial investor-state dispute settlement (ISDS) process, which allows foreign investors to bring claims against governments when policies negatively impact them. In ISDS, investors can make claims for compensation that are many times what they initially invested..."