A legal battle between the Italian government and Rockhopper Exploration looks set to rumble on for up to two more years, as the former seeks to annul a $190m compensation award.
In a 31 October update the UK-listed oil and gas explorer said legal wrangling could now take a further 18 to 24 months, despite it having successfully won an arbitration case in August.
The dispute is linked to the Ombrina Mare field, for which Rockhopper failed to clinch a final concession when Italy reinstated a near-shore exploration ban in 2015.
Rockhopper (LON:RKH) previously said it hoped to be awarded “very significant monetary damages” based on lost profits as a result of the decision – a conviction confirmed in August when an arbitration panel unanimously held that Italy had breached its obligations under the Energy Charter Treaty, entitling it to compensation.
The “final and binding” verdict awarded Rockhopper compensation of €190 million (£160m) plus interest at the Euro Interbank Offered Rate +4%, to be compounded annually from 29 January 2016 until time of payment.
After payments due to a specialist arbitration funder, Rockhopper said it expected to retain approximately 80% of the cash.
However, Italian representatives had 120 days to apply for an annulment and filed a motion accordingly on 28 October, seeking to annul the award under Article 52 of the ICSID Convention, as well as requesting a provisional stay of enforcement.
The firm says it is now consulting with legal representatives as to what submissions will be required to contest the annulment request.
“Having anticipated Italy might attempt to annul the Award, Rockhoppper has a non-binding offer in place to fund both fighting the annulment and enforcing the Award if required. The company will now consider this along with other funding possibilities,” it said in a statement.
A separate success fee of approximately £3 million is due to the company’s legal representatives on establishing liability and an award requiring Italy to pay over €25 million in damages, though the fees are not covered in funding agreements or the award.
Rockhopper said it was in “productive discussions” with its legal representatives with regards to the payment.
Chief executive Samuel Moody said: “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, albeit interest will commence accruing again in December 2022. 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.”
Meanwhile, the firm raised around £2.8m over the summer as it looks to shore up finances to progress the long-awaited Sea Lion project.