George Monbiot is getting very het up - again - about the idea that governments should be held to the contracts they sign:

Or are they? On behalf of commercial interests, governments are all too happy to be constrained. A UK oil company is currently suing the Italian government for the loss of its “future anticipated profits”after Italy banned new oil drilling in coastal waters. Italy used to be a signatory to the Energy Charter Treaty, which allows companies to demand compensation if it stops future projects. The treaty’s sunset clause permits such lawsuits after nations are no longer party to it, so Italy can be sued even though it left the agreement in 2016. This is one of many examples of “investor-state dispute settlement”, that makes effective action against climate breakdown almost impossible. It represents an outrageous curtailment of political choice, with which governments like ours are entirely comfortable. I’m not sure how we can escape such agreements, but government lawyers should be all over this issue, looking for a way out. Otherwise, future corporate profits remain officially more important than life on Earth.

The Italian government, or any other, can ban drilling any time it likes. As the British one has effectively banned fracking. The only restriction is that it must stand by, live up to, whatever contracts it has already signed:

According to the company’s boss, Rockhopper is not just claiming compensation for the money which it actually spent on exploring Ombrina Mare (US$40-50 million). It also wants an additional US$200-300 million for hypothetical profits the oil field could have made had it not been banned.10 While many countries’ constitutions do not consider anticipated profits to be protected private property, in investor-state disputes companies regularly receive compensation for alleged lost future profits.

The Italian state did take the fee to allow the exploration in the first place. It was perfectly happy to see that $40 to $50 million spent on something that might increase its own revenues through royalties. OK, so, now, it changes its mind. Fair enough - it does though have to pay up for the money that it previously received and the amount it encouraged to be spent. On the grounds that the contract it signed, entirely voluntarily, said that it would if it did change its mind.

Whether prospective profits will also be paid out is a matter for that arbitration process. Such arbitration processes necessarily taking place outside the courts controlled by the government being sued of course. Skipping over much of the detail Cairn Energy was charged $1 billion and more in tax by India. Tax which wasn’t actually due under the law at the time. The Supreme Court of India even agreed (in a different case) that it wasn’t due. So Parliament retroactively changed the law to make it so. It’s only that ISDS process outside the Indian political system that has led to even an offer by India to accord with the contractual relationships it voluntarily agreed to.

Just like any other economic actor we need to be able to hold government to the contracts that it signs.

Yes, it’s entirely true that reasons of state do sometimes mean that contracts will be revoked. Or that property will be forcibly acquired. Compulsory purchase of your house to build a railway can indeed happen - but you are to be paid market prices for the property when it is taken from you. As the American Constitution points out the government can’t demand your spare bedroom to house the Marine Corps - but it can pay for and hire as many hotel rooms as it likes.

Any government can change its mind. It can even repudiate contracts. It’s just that when it does so it has to pay for what it is that they’re taking away when they do so. Not paying for such political choices does have a name - theft.