Arbitration proceedings against Italy

TTIP (Transatlantic Trade and Investment Partnership – USA) and CETA (Comprehensive Economic and Trade Agreement – Canada) news followers will be familiar with fierce debates regarding international court of arbitration. With this mechanism, private international companies can request compensation to a State for non-received profits against State decisions that can damage their private investments. In accordance with this instrument, both sides – claimant and respondent – name one lawyer to serve as a judge. Both of these judges then agree on a third judge. The three compose the specific court of arbitration.

The debates highlight many real cases of these arbitrations, affecting other nations and continents. Normally emerging countries are the first to be sued, followed lately by the richer nations such as Germany (fined with EUR 3.7 billion by Vattenfall for phasing out nuclear power) and Canada (fined with EUR 250 million by Lone Pine for limiting fracking).

Now it is up to Italy. An oil and gas multinational company has cited Italy, via an international arbitration court, for wanting to protect its coasts from pollution risks. The British company, Rockhopper Exploration, is expecting compensation after the Italian government banned exploration programmes planned at under 12 nautical miles from the coast. These measures had been temporarily introduced from 2010-2012 following the Deepwater Horizon explosion in the US. The Italian Parliament reintroduced them with the decree of 7/12/2016 (enshrined in law the 03/04/2017): “Standard specifications for the approval of mining rights for the exploration, search and extraction of liquid and gas hydrocarbons, from land, sea and continental shelf (17A02414)”.

Italy’s “crime” is protecting its coasts from a potential black tide similar to the American one among others. It means health, environment, beauty and landscape are according to the multinational, less important than oil and gas exploration.

In 2015 Rockhopper had received permission to explore the Ombrina Mare field in the Adriatic (previously discovered by another company, and subsequently purchased by Rockhopper for EUR 64 million), 10 km away from the local coast. The requested compensation for damages will be based on financial losses only, independently by the initial costs for investments. Thus, the private international company estimates deposits for 40 million barrels of oil, and 184 million-gas m³.

Why we mention this case? Because Rockhopper bases its requests upon the Treaty of the European Energy Charter, which says : countries must ‘provide a stable platform for investments in the energy sector’. The Treaty however does not foresee arbitration that is the reason for which Rockhopper is still uncertain about the outcome of the result of their request.

As for the sea, the same risk is for the ground!

We have to protect our soils also against manipulations by international exploitation of oil or gas deposits. Italian legislation on soil consumption MUST therefore expressly mention the ban to resort to international courts of arbitration.