US energy giant ExxonMobil is suing the EU over an unprecedented windfall tax the bloc will impose on oil and gas companies, the Financial Times has reported.
"Our affiliates, ExxonMobil Producing Netherlands BV and Mobil Erdgas-Erdöl GmbH, are suing the European Council in a bid to annul a new windfall tax on oil and gas companies," ExxonMobil spokesman Casey Norton said on Wednesday.
Norton added that ExxonMobil regarded the levy as illegal and "counterproductive", insofar as it would "undermine investor confidence, discourage investment, and increase [Europe's] reliance on imported energy".
In September, the EU announced that it would impose a 33% tax on this year's profits of fossil fuel companies, which have enjoyed average earnings 20% higher compared to the last four years. The bloc claims that the levy would raise up to €25 billion, which could then be used to make green investments and subsidise European citizens' and businesses' exorbitant energy costs.
Unsurprising that it's ExxonMobil leading the charge for war-profiteers to keep their excess profits Exxon generated record global profits of almost $20bn in the third quarter of this year. The EU windfall tax will claw back a modest $2bn in 2023 https://t.co/yYdSWEWcRW
— Paul Monaghan (@PaulJMonaghan) December 28, 2022
In December, ExxonMobil's Chief Financial Officer Kathryn Mikells noted that the new levy would cost the company $2 billion in 2023. In October, ExxonMobil reported record quarterly profits of $19.7 billion — smashing its previous quarterly record of $17.9 billion in June.
Legal arguments and economic threats
ExxonMobil's basic argument is that only sovereign states, and not supranational institutions such as the EU, have the right to impose windfall taxes on private enterprises. Furthermore, it disputes the legality of the EU's decision to make use of Article 122 of the EU Treaty, which allowed it to implement the tax without consulting with the European Parliament.
In addition to its legal challenge, ExxonMobil issued a thinly-veiled threat to refrain from any future investment in the continent should the levy actually be imposed.
"Whether we invest here primarily depends on how attractive and globally competitive Europe will be," Norton stated.
In an email sent to Politico, Commission spokeswoman Arianna Podestà claimed that the levy is "fully compliant with EU law", and added that the ultimate aim of the tax is to "ensure the whole energy sector pays its fair share in these difficult times to address the extraordinary energy crisis resulting from the weaponisation of the energy supply by Russia."
'More money than God'
ExxonMobil is not the only fossil fuel company to have announced record profits this year: in October, rival US company Chevron and France's TotalEnergies registered similarly astronomical third-quarter earnings of $11.2 billion and $9.9 billion respectively — roughly double what each company made this time last year.
In June, US President Joe Biden explicitly criticised ExxonMobil for making "more money than God" this year, and called on the company to "start investing" and "paying [its] taxes."
Similarly, last month European Commission President Ursula von der Leyen said that "these [fossil fuel] companies are making revenues they never accounted for, they never even dreamt of." She added: "In these times, profits must be shared and channelled to those who need it most."
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Such remarks were echoed on Wednesday by Agathe Bounfour of the NGO Transport & Environment, who described ExxonMobil's lawsuit as "an attempt at intimidation", and that the company had "flagrantly profiteered" over the course of Europe's energy crisis.
The European General Court in Luxembourg will rule on ExxonMobil's lawsuit in the coming months. Its decision could be appealed by either party at the European Court of Justice. No final ruling on the lawsuit expected until the end of next year.
