Members of the European parliament demonstrate their disapproval of a mechanism under which fossil fuel companies can sue governments for passing laws that could affect their future earnings. Photograph: Frederick Florin/AFP/Getty
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.
The company said it has been advised that it has “strong prospects of recovering very significant monetary damages” as a result of Italy’s actions.
Devised in the 1950s by a banker and the chief counsel for oil company Royal Dutch Shell, ISDS was designed to protect companies’ investments in newly independent countries, where it was feared that governments might try to wrest back control of their natural resources. The concept gradually took hold and it is now written into thousands of investment treaties worldwide.
Decades later, fossil fuel companies are using it to protect their assets, this time in the face of an oncoming wave of climate legislation.
That is because ISDS is part of the energy charter treaty (ECT), meaning energy companies can sue any of the 53 signatory countries – including the UK – if they take action that could dent those companies’ future earnings, such as banning the exploitation of coal, oil and gas reserves.
The German energy company RWE, for instance, is suing the Netherlands for €1.4bn (£1.2bn) over its plans to phase out coal - Josephine Moulds (The Guardian) - link
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.
The company said it has been advised that it has “strong prospects of recovering very significant monetary damages” as a result of Italy’s actions.
Devised in the 1950s by a banker and the chief counsel for oil company Royal Dutch Shell, ISDS was designed to protect companies’ investments in newly independent countries, where it was feared that governments might try to wrest back control of their natural resources. The concept gradually took hold and it is now written into thousands of investment treaties worldwide.
Decades later, fossil fuel companies are using it to protect their assets, this time in the face of an oncoming wave of climate legislation.
That is because ISDS is part of the energy charter treaty (ECT), meaning energy companies can sue any of the 53 signatory countries – including the UK – if they take action that could dent those companies’ future earnings, such as banning the exploitation of coal, oil and gas reserves.
The German energy company RWE, for instance, is suing the Netherlands for €1.4bn (£1.2bn) over its plans to phase out coal - Josephine Moulds (The Guardian) - link
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