Business

Commercial Court accepts challenge brought over windfall gains tax on energy sector

State introduced legislation giving effect to an EU regulation on emergency intervention to address high prices

The Corrib gas filed. A challenge over the windfall gains tax on the energy sector by the operator of the field off the west coast has been admitted to the fast-track commercial division of the High Court.

Fri May 3 2024 - 16:37

A challenge over the windfall gains tax on the energy sector by the operator of the Corrib gasfield off the west coast has been admitted to the fast-track commercial division of the High Court.

Mr Justice Denis McDonald said although there had been a delay of some 8½ months by the Vermilion energy group in bringing the proceedings, in the circumstances of the case he understood why the decision to do so required careful consideration.

Those circumstances related to developments in similar proceedings in other jurisdictions including at European level, he said. The court heard that in particular there was a development in the last couple of weeks whereby a challenge to the tax in Belgium has been referred to the Court of Justice of the European Union (CJEU).

Vermilion is seeking a declaration that the regulation bringing in the windfall tax is invalid and also seeking the return of some €98 million it has paid in the tax despite recording losses since 2016, the first full year of production from Corrib. The tax was introduced in response to very high prices in the electricity market arising out of Russia’s was against Ukraine.

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Vermilion Energy Ireland Ltd, Vermilion Exploration and Production Ireland Ltd, and Vermilion Energy Corrib Ireland Ltd, have brought proceedings against the Minister for the Environment, Ireland and the Attorney General.

Last year, Ireland introduced legislation giving effect to an EU regulation on emergency intervention to address high energy prices.

It meant energy companies had to pay a “solidarity contribution” at a minimum rate of 33 per cent, calculated by reference to taxable profits in the fiscal years 2022 and/or 2023.

It applied to profits which are above a 20 per cent increase in the average of taxable profits and member states could decide whether or not to include 2022.

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On Friday, Michael Cush SC, for Vermilion, said there was now an urgency about the case being dealt with in the fast-track Commercial Court in the light of the development in the Belgian case.

Catherine Donnelly SC, for the defendants, opposed entry of the case to the commercial list on grounds of delay in bringing it. The urgency was created by choices made by Vermilion itself, he said.

The judge, after considering the submissions, said there was no question it was a case which would normally be admitted to the Commercial Court. The only issue was the delay of eight to 8½ months in bringing the case but he believed that had been explained.

The court also heard the defendants will apply for a stay on the Irish proceedings pending determination of the reference to the CJEU in the Belgian case.

The judge adjourned to next week the questions of the stay and the making of directions on how the case should progress.

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