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RKH DO Rockhopper continues to believe it has strong prospects of recovering very significant monetary damages - on the basis of lost profits - as a result of the Republic of Italy's breaches of the Energy Charter Treaty. All of Rockhopper's costs associated with the arbitration to date have been funded on a non-recourse ("no win - no fee") basis from a specialist arbitration funder.
On page 122 of the 'ICSID CONVENTION, REGULATIONS AND RULES' Rule 48 Clause 4 states: '(4) The Centre shall not publish the award without the consent of the parties. The Centre shall, however, promptly include in its publications excerpts of the legal reasoning of the Tribunal’.
As any Award in favour of Rockhopper would create a valuable precedent for other parties considering legal action against the Italian State - it seems very likely that Italy will refuse consent for ICSID to publish the Award. Whilst RKH will be required to issue an RNS informing its shareholders that it has won the case might it be a redacted version of the Award with the financial details omitted?
One other point. Assuming that RKH win the case and the Arbiters agree that there should be compensation for lost profits – the quantum will hinge on several variables of which the most difficult will surely be the price of oil over the next 20 years. In Q1 2020 around the time a decision may have been made, RoI would have probably argued that the price of oil was under $20 and clearly in terminal decline. RKH would have argued that it was simply a low point in the cycle. A compromise may have been struck to take an average in the price of oil over the next 24 months - which might account for the inexplicable two year delay. By Q4 2021 with the price of oil soaring over $80 – RoI panics and instructs their lawyers to have another attempt to challenge the jurisdiction of ICSID - which might account for the Eleventh Hour last ditch attempt to derail the case.
Is it quite feasible then that the reason for the award not being announced yet is due to a RHK/Italy OOC negotiation in progress? or, are they just finishing off totting up the additional costs recently submitted and amending the award documentation accordingly?
I agree Grey Squirrel, however an OOC would not set a ''legal precedent''.
Clearly Italy will desperately want to avoid losing as all future claimants would 100% cite the Rock v Italy case. Going for an OOC means another claimant would have to start from scratch to win their case, and that may be worth $100m to them. They managed to drag this case out for 5 years, they will be happy to drag another one out that long if Rock have an OOC. With a Rock win I can see Italy facing many more cases this year. $100m now might seem a bargain, compared to $100m plus a legal precedent and flood gates opened.
The issue with "not setting a precedent" through a settlement is that any settlement will nonetheless set a semi-precedent. It might not be a clear cut court or tribunal precedent, but a settlement will make it quite clear that in similar circumstances a party could either expect an award or their own settlement.
As a public company, RKH will not be able to keep anything (certainly the most important parts) confidential, which is when settlements can be useful.
There are many possibilities and variations until Zzzzz ICSID declare, I’m sure we are all aware of them.
Rock lose---- and then dilute perthaps 25% and bring in $10m cash Rock lose----and they sell Navitas or 3rd party 5% of SL, in exchange for cash/loan/carry Rock lose and Navitas don’t sign JV-----pretty much game over
Rock Win-----Italy pay up Rock Win-----Lawyer teams get the heads up, and Italy do an out of court deal to NOT set a legal precedent Rock Win-----Italy agree to pay a reduced fee in return for prompt/staged payment Rock Win-----Italy refuse to pay and Rock sell on debt Rock Win-----Italy refuse to pay and Rock get debt finance on the back of the debt owed by Italy
There appears no reason why ICSID can not declare the award. Lets hope it’s next week as one way or the other !
Italy has two problems - the likely payment to RKH of a substantial sum as compensation for OM costs and lost profits + setting a very expensive precedent which other energy companies may use to win similar claims.
However, IMHO Italy does have an alternative option, which I hope RKH has discussed with the other side.
Italy to pay RKH $150m. Immediate payment with no delays. This would be sufficient to cover all RKH Non SL costs (say $25m) + payment to Harbour Litigation (say $50m) with remainder ($75m) to strengthen bank balance*.
Italy to grant with immediate effect Drilling / Production licences to RKH for Ombrina Mare and Monte Grosso.
Italy to 'Suggest' to Eni that they might like to purchase all of RKH's Italian licences (incl OM, MG, Civita etc) for say $150m - payable in 12m.
There could even be an opportunity offered to ENI to join the Sea Lion JV, as part of the deal. Eni SpA is one of the seven global "supermajor" oil companies with a MC of $36bn with 30% of the shares - incl a 'Golden Share' - owned by the RoI.
Ensure there is a clause in contract which voids Agreement if RKH has any change of ownership in next 12m.
RKH gets $150m with no delays or costs for enforcement + further $150m lump sum in 12m to pay share of Sea Lion costs + poison pill to discourage any short term predatory bids.
Eni get two excellent Production licences (Eni already has 77% of Monte Grosso but no current share in Ombrina Mare) + other 'Research' licences, with nothing to pay for 12 months.
Cost to Italy is only $150m with no precedents set, so substantial future savings. Italy gets two large O&G fields into production to ease domestic energy crisis + related tax income.
Mario Draghi can blame RKH for forcing Italy into a corner. Green lobby will hate it but it will save Italian taxpayers hundreds of millions, by avoiding future payments based on precedent.
*Sufficient to fund $25m dollars ‘loyalty payment’ payable to Long Term RKH Shareholders !