Community protest is not a law. “Rockhopper” award pushes for balance between environment interests an investment protection

The EU announced yesterday plans for joint withdrawal form Energy Charter Treaty (ECT), ending the last dramatic efforts to reform it. ECT was blamed for threatening the autonomy of the EU law  and  distorting climate goals throug fossil fuel investments. This marks the beginning of the end of the saga of the single most invoked investment agreement that gave legal basis for 150 investment arbitrations shaping (and sometimes distorting) international standards of investment protection.

National policies are bound to change yet international investments require a stable legal environment established by treaties. While it cannot be claimed that investors have no interest in environment protection, it is also true that in addressing an issue of environmental concern the government may negatively impact investors’ actual or expected profits. What’s more, from livestock operations to big energy or mining projects local communities’ interests might not be coinciding with those of the government.

In one of the latest arbitral decisions under ECT against Italy (and after the latter’s withdrawal but before the expiration of the sunset clause) British oil producer Rockhopper has been awarded a compensation for having been denied a licence to exploit an offshore oilfield as a result of intense popular campaigning from regional and local authorities and environmental associations, who had successfully requested a referendum on the matter. Technically Rockhopper had met all the conditions set by Italian law to be granted the licence, so the denial by reconsidering the environment impact assessment a posteriori amounted to an unlawful expropriation. The tribunal held that State’s sovereign powers to regulate are in no way affected by investors right to obtain compensation for the negative consequences it might suffer as a result.

Local environmental campaigning is deeply grounded in modern Lithuanian decision taking. In 2012 a referendum cancelled agreed nuclear power plant project, fracking projects were extensively protested and later withdrawn, wind energy projects still meet local resistance. The investors are encouraged to establish open dialogue with the government and local population before the application for concession is submited.




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