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Article

25 Jul 2021

Author:
Josephine Moulds, The Guardian

Outrage as Italy faces multimillion pound damages to UK oil firm

'Outrage as Italy faces multimillion pound damages to UK oil firm', 25 July 2021

"Italy could be forced to pay millions of pounds in damages to a UK oil company after banning new drilling near its coast.

The case has sparked outrage at the secretive international tribunals at which fossil fuel companies can sue governments for passing laws to protect the environment – amid fears that such cases are slowing down action on the climate crisis. It is also fuelling concern that the UK is particularly exposed to the risk of oil firms suing to prevent green policies, potentially hampering climate action.

Rockhopper Exploration, based in Salisbury, Wiltshire, bought a licence to drill for oil off Italy’s Adriatic coast in 2014. There had already been a wave of opposition to the project, with protests that drew tens of thousands of people. Within two years, the campaign won over the Italian parliament, which imposed a ban on oil and gas projects within 12 nautical miles of the Italian coast.

Rockhopper fought back using a relatively obscure legal mechanism known as investor-state dispute settlement (ISDS), which allows companies to sue governments for introducing policies that could affect their future earnings. Reports suggest Rockhopper has spent $29m (£21m) on the offshore project to date and is claiming damages of $275m based on expected future profits from the oilfield...

...Several London-listed companies have recently launched lawsuits under ISDS, including mining companies Anglo American and Glencore, which are suing the Colombian government after they were banned in 2017 from exploiting part of a huge opencast coalmine because of its impact on the environment...

... The main criticism of ISDS is that the justice it provides is imbalanced because governments cannot sue companies and it is only open to foreign investors. In the past, the cost of legal fees – which average $8m a case – has also made it the preserve of multinational corporations. A number of specialist funders have, however, emerged offering a “no win no fee” service for international arbitrations."

Part of the following timelines

The Energy Charter Treaty

Investor-State Dispute Settlement

Oil firm Rockhopper successfully sues Italy after ban on oil drilling