Rockhopper Exploration plc (LON:RKH), an oil and gas company with significant interests in the North Falkland Basin, has provided an update on its International Centre for Settlement of Investment Disputes (“ICSID”) arbitration with the Republic of Italy.
Arbitration Panel’s Decision
On 24 August 2022, the arbitration panel unanimously held that Italy breached its obligations under the Energy Charter Treaty. This entitles Rockhopper to receive compensation of €190 million, along with interest at EURIBOR + 4%, compounded annually from 29 January 2016 until the time of payment, except for the four-month period immediately following the date of the Award.
Italy’s Application to Annul the Award
On 28 October 2022, Italy applied to the ICSID seeking to annul the Award under Article 52 of the ICSID Convention. Italy also requested a provisional stay of the enforcement of the Award pursuant to Article 52(5) of the ICSID Convention. The provisional stay prevents Rockhopper from taking legal action to enforce the Award in any jurisdiction.
Ad Hoc Committee’s Orders
After a hearing on 6 March 2023, the ad hoc Committee convened by ICSID to rule on the annulment issued orders with regard to the provisional stay of enforcement. The first order is that Italy and Rockhopper should confer in good faith to find an effective arrangement to mitigate the risk of non-recoupment using a first-class international bank outside the European Union or as agreed upon by both parties. This is to avoid the risk that, in the event the Award is annulled, Italy may not be able to recover Italian assets seized or frozen by Rockhopper in court enforcement proceedings before the ad hoc Committee issues its decision on annulment.
The second order is that Rockhopper should, within 30 days of the date of the decision, apprise the Committee of the arrangements agreed with Italy for the mitigation of the risk of non-recoupment. If negotiations have failed, Rockhopper should propose concrete arrangements in accordance with the decision. Italy may then briefly comment on Rockhopper’s proposal within 10 days, highlighting any areas of disagreement constructively.
Current Status
The provisional stay of enforcement remains in force during this time, pending further order from the Committee. The decision to lift the provisional stay of enforcement is unrelated to the merits of Italy’s annulment request. A final hearing in relation to Italy’s request to annul the Award is scheduled to take place in Q1 2024. Rockhopper is currently paying all legal costs associated with the annulment.
CEO’s Statement
Sam Moody, Chief Executive of Rockhopper Exploration, expressed his appreciation for the pragmatic approach taken by the ad hoc Committee. He also stated that the company looks forward to working with Italy to find a suitable outcome that will allow them to commence enforcement with no risk to Italy of non-recoupment pending the outcome of the annulment.
Rockhopper Exploration plc’s ICSID arbitration with the Republic of Italy continues to evolve. The company remains optimistic and is confident that a favorable outcome will be reached soon. We will continue to monitor the situation and provide updates as they become available.
