The Rockhopper vs Italy lawsuit was filed in March 2017 under the ECT. Rockhopper is seeking compensation from the Italian state after new regulations brought an end to the company’s oil and gas exploration project called Ombrina Mare. Even though Italy withdrew from, the Energy Charter in 2016 a “sunset clause” makes it possible for companies to sue the former Member State for 20 years after it has left. The Rockhopper case awaits a verdict and Aiello is one of the lawyers representing the state — he is an insider, but not a part of the system, per se.

At present, how ECT cases are pending against Italy?

There are currently 11 cases, all intra-European, of which nine are photovoltaic cases, one is for wind power with the German Hamburg Commercial Bank and the big Rockhopper case, which is the only oil and gas case we have had so far.

And before that?

Seven cases so far with ECT, three unfavourable for Italy, four favourable to the Italian State.

How much do arbitration awards cost the Italian state?

On average, €1-1.5 million for each one. [Take into account] that the fee of one of the firms specialised in these arbitrations is €2-3 million.

Where are we with the Rockhopper case and what are your expectations?

The judgement is expected soon. The company has demanded USD 275 million plus probably interest. They pretend they have spent until now USD 29 million ­ 23 for predeveloping and 6 for the decommissioning. The rest is loss of earnings, that the Treaty allows to ask for.

A defeat in this arbitration would be extremely serious, because it would give other companies ­ whose 12-miles extraction projects have been blocked ­ the desire to emulate Rockhopper.

Did you put forward the objection that, between European countries, the Energy Charter Treaty should not apply, as the “Achmea ruling” in 2018 indirectly stated?

Yes, we followed a line common to Spain, consistent with the European Commission’s guidelines, whereby the Energy Charter’s arbitration clause does not apply in intra-Community disputes. However, our exception was rejected. The arbitrators invoked Article 26 of the ECT, which states that everyone is a contracting party, without making a difference between EU and non-EU countries. But now the European Court of Justice is planting its feet, let’s see how it will end”.

What ruling are you waiting for?

The Paris Court of Appeal asked for a preliminary ruling in 2019 (C-471/19) regarding the jurisdiction of the French court in arbitration with Moldova. However, many European governments have sent answers to the Court’s questions regarding the interpretation of the ECT with respect to EU law and we are now waiting for a ruling, which we hope will put clarity. With us, this time, besides France, are Spain, Germany, the Netherlands and even the Commission. Only Sweden and a few others are against.

What will happen if the ECJ says that the ECT should not apply to disputes between EU countries?

We will enter an interesting phase. Let’s assume that the ECJ says no more intra-EU disputes, and instead, arbitrators around the world continue to ignore this ruling. The problem is that in order for an arbitration award to become enforceable, it then needs a “homologation” ruling by an ordinary judge, from any country in the world. This is stated in the 1958 New York Convention on the Enforcement of International Arbitration. Without this judgement, the company ­ even if it has won an award ­ cannot act enforceably to obtain compensation from the State. Now, when all the ordinary courts of the European Union refuse to make an award enforceable, simply because they do not recognise it (as we hope the EU Court will say), then the company, or the State, will travel the world looking for a “soft” judge. This has happened to Spain, which has to answer for an award in Australia. What has happened to us is that in an unfavourable award issued in the context of the Stockholm Chamber of Commerce arbitration procedure ­ although suspended by the Stockholm Court of Appeals, which we appealed against ­ the other party has also requested approval by the District Court of New York with a view to compulsory enforcement.

So parallel justice timelines can be very long.

They are — ­ it really becomes a Russian roulette. In the meantime, with arbitration, there is no obligation to follow case law, no hierarchy of sources. Each case can be different from the next and then a company can always find a favourable judge, say, in Burkina Faso. And once the probate judgment is approved, then — again according to the New York Convention — a State’s debt is enforceable under any circumstances of international law. If, for example, Libya owes Italy €200 million for a previous debt, this sum could be attacked by the victorious party — or whoever — who is waiting for the execution of an award.

A hellish chaos is created, with very high costs for the taxpayer and little legal certainty.

Yes, but the even more worrying phenomenon we are witnessing is that a highly profitable arbitration market is being created, because some Anglo-Saxon ‘super’ law firms manage to find funding from investment funds to push companies into arbitration that they could not otherwise afford, as they do not even have the money to pay legal fees. After all, it is well known that an arbitration panel always finds a way to grant something in a purely compromising way. So for a company, it is a way to earn money ­ for the lawyers involved a lot of money; for the state, it is a loss of its citizens’ money. Ordinary justice, on the other hand, offers greater guarantees of protection due to the independence ­ including economic independence­ of the judges who administer it and the existence of two or more levels of judgement with which to remedy any judicial errors.

Read more about our investigation into the Energy Charter Treaty.