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UK independent hit by $190 million annulment claim

Upstream | 31 October 2022

UK independent hit by $190 million annulment claim

By Amanda Battersby

UK-based upstream independent Rockhopper Exploration has been dealt a blow in its protracted legal battle with Italy with the European nation on Friday applying to the International Centre for Settlement of Investment Disputes (ICSID) to annul the €190 million ($190 million) payment it was ordered to make in the previous couple of months.

“It is disappointing, although perhaps not surprising, that the Italian government has chosen to pursue an annulment of the award. Based on legal advice we believe annulment proceedings are likely to take approximately 18 to 24 months,” said Rockhopper chief executive Samuel Moody, recognising that interest will start accruing again in December 2022.

In August, Italy was ordered to pay London-listed Rockerhopper €190 million in compensation after an international arbitration panel ruled the European nation had breached its obligations under the controversial Energy Charter Treaty (ECT).

Rockhopper had launched the action in 2017, four years after it acquired the Ombrina Mare field in the Adriatic Sea from Mediterranean Oil & Gas.

In 2015, the Rome administration had banned hydrocarbon extraction within 19 kilometres of the country’s coast, scuppering Rockhopper’s plans for the asset. The ban was partly in response to environmental concerns following the Deepwater Horizon disaster in 2010.

Unanimous decision

The ICSID arbitration panel in August unanimously held that Italy had breached its obligations under the ECT, entitling Rockhopper to compensation of €190 million plus interest at Euribor + 4%, compounded annually from 29 January 2016 until time of payment (except the four-month period immediately following the date of the award).

However, Rockhopper on Monday confirmed that on 28 October Italy had submitted an application to ICSID seeking to annul the award under Article 52 of the ICSID Convention. Italy has also requested a provisional stay of the enforcement of the award pursuant to Article 52(5) of the ICSID Convention.

Rockhopper said that it is consulting with its legal representatives as to what submissions will be required to contest this application.

“We remain confident in the strength of our case, as was reflected in the unanimous decision underpinning the award in August, and very much hope and believe the annulment request will be rejected in due course,” added Moody.

After having anticipated Italy might attempt to annul the award, Rockhoppper has a non-binding offer in place to fund fighting the annulment and enforcing the award if required, and it will now consider this along with other funding possibilities.

A separate success fee of approximately £3 million ($3.47 million) is due to the company’s legal representatives on establishing liability and an award requiring Italy to pay more than €25 million in damages. However, the £3 million is not covered by either funding agreement.

Rockhopper said it is in “productive discussions” with its legal representatives as regards to this payment, given Italy’s request for annulment.

 source: Upstream