ISDS Tribunal orders Italian government to pay UK mining company A$360 m over oil and gas drilling regulation
August 25, 2022: The Guardian reports that the Italian government has been ordered by an international tribunal to pay EUR190 million plus interest, a likely total of EUR250 m, (A$360 m) to UK oil and gas company Rockhopper Explorations, because in 2015 Italy banned new oil and gas projects within 12 nautical miles of its coastline.
The investor-state dispute settlement (ISDS) process in the Energy Charter Treaty (ECT) enables foreign investors to claim compensation for changes in law or policy even if they protect the environment or help to reduce carbon emissions. The huge sum is almost nine times the company’s initial investment of EUR29 m, since ISDS allows it to claim for future lost profits. Italy has since withdrawn from the ECT, and other European governments are threatening to do so.
The Europe Climate Action Network quoted Monica Di Sisto, spokesperson of the Italian “Stop ISDS” campaign: “We ask for an immediate meeting of the Italian government to rethink the trade rules that allow the looting of public finances and the violation of the rights of communities, territories and environment as happened with today’s sentence.”
Leah Sullivan, campaigner at War on Want said: “It is indefensible that the UK’s trade and investment agreements enable fossil fuel companies to penalise countries for taking the right steps for the climate and environment. The UK must remove ISDS from its trade deals and leave the Energy Charter Treaty as soon as possible. The ECT is also a threat to climate action in the UK – if a future government decides to reverse new coal and oil projects it could leave the UK taxpayer open to huge compensation claims.”
A recent comprehensive study showed increasing cases by mining and energy companies claiming billions in compensation for government decisions to phase out fossil fuels to combat climate change, and recommended that ISDS be removed from trade agreements. The Intergovernmental Panel on Climate Change (IPCC) also recently warned that climate action is being threatened by ISDS clauses in trade agreements.
AFTINET has warned in a recent Guardian article that Australia is also vulnerable to such ISDS cases, because of ISDS provisions in the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) between 11 Pacific Rim countries, including Japan. ISDS was also included in bilateral agreements with China, Korea, and Hong Kong. Companies from all these countries have fossil fuel and/or energy investments in Australia. The Labor government should implement its policy to remove ISDS from these agreements to remove this threat to effective action against climate change.
Read the Guardian Rockhopper report here.
Read the Guardian Australian article here