Energy giant ExxonMobil sues European Union in a bid to block new windfall tax

The United States oil giant, ExxonMobil Corp, has filed a lawsuit against the European Union in a bid to block the 27-nation bloc’s new windfall tax on oil and gas companies. This comes after the European Commission proposed to levy a windfall tax on the profits of energy producers at the General Court of the EU, in Luxembourg, on Wednesday.

The windfall tax is imposed on a firm which has benefitted from something they were not directly responsible for, in this case, it could be energy firms making profits for their products, partly due to the supply chain issues as a result of the Russian invasion of Ukraine. However, the company has argued that Brussels exceeded its legal authority by imposing the proposed tax and called it “counterproductive”.

The lawsuit also argues that the measure is a tax the right of which is reserved with the national governments and challenges the use of the EU Treaty’s Article 122, an emergency procedure that excludes the European Parliament, to enact the legislation. This also comes after the company as well as the oil sector has made record profits this year, due to high energy prices and soaring inflation across the world, which has renewed calls to impose additional taxes on the sector.

In October, ExxonMobil reported a quarterly profit of at least $20 billion. A month prior, the European Commission chief Ursula von der Leyen announced the plan for oil, gas, and coal companies to pay what she called a “crisis contribution” on the increased profits this year. However, Exxon spokesperson Casey Norton, said that the move discourages investments and undermines investor confidence.

He added, “Whether we invest here primarily depends on how attractive and globally competitive Europe will be.” The lawsuit was first reported by Financial Times, on Wednesday, which was filed through the company’s subsidiaries in Germany and the Netherlands. In September, the EU countries passed an emergency package of legislation aimed at tackling soaring energy prices and a minimum 33 per cent tax which it referred to as the “crisis contribution”.

The relevant profits could be from fiscal years 2022 or 2023, depending on the country, said the EU. If passed, the windfall profit tax in question would cost at least $2 billion by the end of next year, said CFO Kathryn Mikells during a call with analysts, earlier this month, reported Reuters. The energy giant has also noted that they have invested $3 billion in the past decade in refinery projects in European countries.

In reference to these projects, Exxon believesthey are helping deliver more energy products at a time when Europe struggles to reduce its imports from Russia. “We will continue to work with EU leaders to address these issues. Thoughtful policy is critical,” said the company. On the other hand, the European Commission has said that it has noted Exxon’s legal application and that decision is now up to the Luxembourg-based General Court, “to rule on this case”, reported the Financial Times.

(With inputs from agencies)

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