Five energy companies are seeking damages of almost €4bn from the governments of four European countries for hampering coal, oil and gas projects, according to a news report.
UK firm Rockhopper Exploration PLC (AIM:RKH) and the German companies RWE (ETR:RWE) AG and Uniper have launched cases against the Netherlands, Italy, Poland and Slovenia under the Energy Charter Treaty (ECT), following decisions by those countries’ governments to either mandate the closure of coal power plants, prevent the development of specific projects or require an environmental impact assessment, the Financial Times reported.
The various companies are seeking an estimated €3.7bn in compensation in the five cases, according to documents reviewed by the FT.
The ECT, created after the cold war and signed by more than 50 countries, was intended to protect international energy investments by foreign companies or individuals. This protection extends to fossil fuel projects, which discourages governments from introducing policies to close industries that cause global warming because of concern over potential legal action.
RWE (ETR:RWE) told the FT that although it agrees with “the importance of the energy transition”, the company “does not consider it right” that the Dutch coal phaseout “does not provide for compensation for the disruption to the company’s property”.
Meanwhile, Uniper said its “first concern” was “to obtain legal clarity” about having to close its coal power plant early without adequate compensation.
One of the lawyers representing the Italian government in the case brought by Rockhopper — after the state’s refusal to permit the development of the Ombrina Mare oilfield in the Adriatic Sea — said a defeat would be “extremely serious”, as it would give other companies “the desire to emulate Rockhopper”.
The German finance ministry warned the chancellor’s office in 2019 that using regulation to phase out coal would create an “increased risk of litigation, especially international litigation based on the ECT”, according to an email seen by the FT.
ECT cases are often shrouded in secrecy, with documents rarely made public, and the cost of bringing or defending a case related to the treaty can run into the millions, the FT said.
A 2021 report by the International Institute for Sustainable Development found that “the majority of known fossil fuel [investor-state dispute] cases are decided in favour of investors”.
Talks are currently under way to update the ECT. The European Commission has submitted a proposal to phase out protections for fossil fuel, but this has been rejected by other signatory countries.