Exxon is suing the EU to block new windfall taxes on oil companies

ExxonMobil has sued the EU to try to force it to scrap the bloc’s new surprise tax on oil groups, arguing that Brussels exceeded its legal powers by levying the levies.

The lawsuit is the most significant response yet to oil industry taxes that have been targeted by Western governments amid soaring energy prices following Russia’s invasion of Ukraine. The move threatens the viability of the levy, which the European Commission said would raise €25 billion “to reduce energy costs”.

Exxon said the lawsuit was filed Wednesday by its German and Dutch subsidiaries at the European General Court in Luxembourg. It challenges the EU Council to impose the new tax, which has historically been reserved for sovereign nations, and the use of emergency powers to ensure member states approve the measure.

Exxon spokesman Casey Norton said the U.S. giant recognized that high energy costs were a “burden on families and businesses” but argued the levy was “counterproductive” and would “undermine investor confidence, discourage investment and increase dependence on imported energy.” from energy.”

Exxon has spent $3 billion on European refining projects in the past 10 years, boosting production “at a time when Europe is struggling to reduce its energy imports from Russia,” Norton said.

Exxon was now looking at “future multi-billion euro investments” on the continent, Norton added. “Whether we invest here depends primarily on how attractive and globally competitive Europe will be.”

The so-called solidarity contribution was one of several measures agreed by the council in September to reduce the burden on energy consumers, recycle collected money to hard-hit consumers or invest in clean energy supplies.

Other measures included limiting revenues from energy-saving energy production. Exxon was not opposed to them, Norton said.

The European General Court will decide whether to rule on Exxon’s lawsuit. If so, any future ruling could be appealed to the European Court of Justice. The process could drag on for much of next year.

The Commission is the EU’s executive body with the power to propose legislation. The Council is the intergovernmental arm of the EU, where representatives of the 27 member states discuss and agree legislation.

The European Commission said it “takes note” of Exxon’s legal application and added that “it is now up to the General Court to decide on this case”.

It also said it “maintains that the measures in question are fully compliant with EU law” and that the solidarity investment “will ensure that the entire energy sector pays its fair share in these difficult times”.

The new tax is due to take effect on December 31 and will impose a levy of at least 33 per cent on any taxable profits in 2022-23 that are 20 per cent or more above average profits between 2018 and 2021.

Exxon, one of Europe’s biggest oil suppliers, said in a November filing that its tax liability under the new solidarity levy could reach $2 billion by the end of 2023. quarter

Brussels has regularly used emergency powers under Article 122 of the Treaty on the Functioning of the EU during the energy crisis. The article states that “in the spirit of solidarity” member states can adopt legislation directly from the commission, bypassing the European Parliament, “in particular if serious difficulties arise in the supply of certain goods, especially in the energy sector”.

Exxon’s suit says the windfall tax won’t fix any energy shortages, and so the commission and board erred by using emergency powers to ensure its approval by a majority rather than a unanimous vote.

The European Parliament has protested the Commission’s repeated use of Article 122, saying it undermines the democratic process, even if it takes much longer to pass laws with its participation.

Rising oil company profits this year have sparked pressure from Western governments as rising fuel prices have fueled rampant inflation and threatened to tip economies into recession.

The EU levy was followed in November by Britain, which increased its windfall tax on oil and gas producers from 25 percent to 35 percent and extended it until 2028. The move sparked outrage from local manufacturers who said the measure threatened future investment. .

The windfall taxes have also been contested in Italy, where a case brought by wind energy company ERG was dismissed by a court last month. Spanish oil and gas group Cepsa has also threatened to sue Madrid over a similar levy in the Iberian Peninsula.

The participants of the campaign responded to this accusation. Agathe Bunfour, oil executive at the NGO Transport & Environment, described Exxon’s lawsuit as an “intimidation attempt” and said oil and gas companies had engaged in “outrageous profiteering” during the crisis.

Additional reporting by Henry Foy and Alice Hancock

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