5 things Rockhopper case tells us about ECT's threat to climate justice

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Rockhopper penguin
Last month, UK oil and gas company Rockhopper successfully sued Italy for £210 million over Italy’s law banning coastal oil drilling. The case was made possible by the Energy Charter Treaty (ECT). The verdict is proof that climate justice won’t be possible until we exit the ECT and end ISDS. Here’s 5 reasons why.
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Our friend, and grassroots campaigner against the Ombrina Mare oil drilling project explains exactly what happened in the Rockhopper vs. Italy case.

1. Pay-outs to fossil fuel companies will mean more fossil fuels

Immediately after Rockhopper’s victory, CEO Sam Moody announced that the pay-out would make a ‘material contribution’ to the costs of drilling a new oil field. Rockhopper’s new site in The Falkland Islands/Las Islas Malvinas holds 1.7 billion barrels of oil. That’s equivalent to ten Cambo oil fields, and if burned it would produce around one and a half times the annual greenhouse gas emissions of the UK.  

As the biblical flooding devastating Pakistan has made clear: we must stop burning fossil fuels. The Rockhopper case shows we won’t be able to do that without taking down ISDS (Investor State Dispute Settlement). We now know that the ISDS system at the heart of the Energy Charter Treaty — which is allowing fossil fuel companies to sue states standing in the way of their projects — is also funding further projects. Rockhopper had only invested €28 million in the scrapped Italian project — ISDS turned that into a massive profit it can plough into driving us deeper towards climate breakdown. 

2. We’re going to get a lot more cases 

The Rockhopper outcome is likely to encourage more oil and gas companies to take up ISDS cases. The Italian state attorney called this defeat “extremely serious, because it would give other companies, whose 12-miles [of] extraction projects have been blocked, the desire to emulate Rockhopper.” And it’s not just in Italy. 

The Irish Times have pointed out that Ireland, which passed a ban on oil exploration similar to Italy’s last year, could be in the firing line.1 It’s highly likely that fossil fuel companies active across the ECT member countries will be emboldened to use this shadowy legal system to exploit government efforts to tackle the climate crisis. 

3. Really, we’re going to get a lot more cases  

Rockhopper couldn’t pay its own legal fees, so it sought the support of a third-party funder — a specialist litigation funder who makes money by betting on the outcome of cases like this — to represent them on a ‘no win no fee’ basis.  

Harbour Litigation Funding, who funded this case, may get as much as €50 million from the Italian taxpayer — around 20% of the total take. Lawyers are already suggesting2 that the outcome will further encourage funders to bet on ISDS cases. This arrangement also makes it much easier for investors to take claims against states, enabling them to make speculative claims against the public purse they couldn’t otherwise afford. 

4. Leaving the ECT unilaterally won't be enough

Italy was sued despite not having been a member of the ECT since 2014. That’s because Zombie clauses (sometimes known as ‘sunset clauses’) mean that states who leave the treaty are still liable for claims up to 20 years after leaving. Rockhopper was the first case Italy has faced since leaving the treaty, but it has ten more cases pending.  

Whilst a number of countries, including Poland and Spain are considering following Italy and leaving the ECT unilaterally, this case tells us is that it won’t be enough to protect taxpayers’ money from fossil fuel giants and speculating lawyers. We can and must go further, and end ISDS. 

5. ECT 'modernisation' wouldn't have made any difference

Right now, there is a proposal on the table for the ‘modernisation’ of the ECT. Proponents of the reform say it solves the problems with it. But would a modernised treaty have made any difference?  

Nope — although the headline reform of the ‘modernisation’ process is that ISDS would not apply between EU member states (or those who were EU members when the alleged violation of the ECT took place, like the UK), legal scholars highly doubt that this exception can be made to work in practice.3 

The proposed ‘modernisation’ is a greenwash. It would see states signing-up to at least another ten years of corporate claims over climate action and pull even more countries in the Global South into the treaty. The ECT ‘modernisation’ plan doesn’t touch the 20 year ‘Zombie’ clauses. 

We need to see a coordinated withdrawal from the treaty, and the neutralisation of the Zombie clause, without delay.

Oil Refinery at Dawn by Iguanasan is licensed under CC BY-NC-ND 2.0

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