UK oil and gas company Rockhopper has won over £210m (over €250m consisting of an award of €190m plus interest), after it sued the Italian government following the introduction of a ban on offshore drilling. The ban prevented Rockhopper from opening a new oilfield, Ombrina Mare. The amount is more than 6 times more than Rockhopper’s actual investment in the Ombrina Mare project, which is understood to be around £33m.
Keeping to the 1.5°C climate target requires no new fossil fuel projects, according to the International Energy Agency.
The case was brought using the little-known and controversial Energy Charter Treaty (ECT). This treaty allows corporations to sue governments in private, closed-door tribunals outside of the national legal system over policy decisions taken by governments that they perceive to affect their bottom line. The mechanism is formally known as investor state dispute settlement or ISDS.
Fossil fuel companies have increasingly started to use this mechanism, with most using the ECT. The most recent IPCC report warns of a “regulatory chill” from ISDS, specifically mentioning the ECT and highlighting the risk of fossil fuel corporations using this to “block” the phase-out of fossil fuels by making the transition unaffordable.* The costs are borne by taxpayers.
The UK government and other member countries of the ECT have been discussing changes to the treaty. However, the current proposals would keep fossil fuel projects protected for ten more years. Research has shown that the UK is at high risk of being sued under the ECT.
Cleodie Rickard, 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. It is far more than the company actually invested. 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 ten 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.”
*IPCC, Climate change 2022: mitigation of climate change, 2022, p14-72 & p14-81