Exxon sues European Union for blocking new Windfall tax on oil companies

US oil major ExxonMobil has sued the European Union in a bid to forcefully scrap the block’s new windfall tax on oil groups. Its Supermajor argues that Brussels exceeded legal authority by imposing the levy set to raise up to Euro 25bn. Exxon spokesperson Casey Norton said the windfall profits tax is ‘counter-productive’ as it discourages investments and undermines investor confidence. He further elaborated that Exxon will factor in the tax as it considers future multi-billion euro investments in Europe’s energy supply and transition, according to reports.

The Financial Times reported the lawsuit on Wednesday, where Norton stated, whether they invest here or not primarily depends on how attractive and globally competitive Europe will be. Through the end of 2023, Europe's windfall profit taxes could cost at least $2 billion, Chief Financial Officer Kathryn Mikells said in a teleconference with analysts on December 8.

Exxon said that the lawsuit was filed on Wednesday by their German and Dutch counterparts at the European General Court in Luxembourg City. It is a power historically reserved for the sovereign countries to secure member states’ approval for the measure.


The lawsuit remains the most significant response against the tax from the oil industry, which has been targeted by western governments amidst surge in energy prices, especially after Russia’s invasion of Ukraine.


Exxon – one of the largest petroleum suppliers in Europe, noted its tax liability under the new solidarity levy which could amount to $2bn by the end of the year 2023. Brussels, which comes under the European Union, made regular use during the energy crisis granted in Article 122 of the Treaty on the Functioning of the EU.
Now, the European General Court will decide whether to rule on Exxon’s lawsuit. Any future judgment will be appealed at the European Court of Justice. The new tax will be applied from December 31st with a levy of at least 33 percent on any taxable profits in 2022-23, that are 20 percent or more above average profits between 2018 and 2021.

According to Exxon, it has spent $3 billion over the last ten years on refinery developments in Europe. At a time when Europe is working to cut back on its imports from Russia, the projects are assisting it in delivering more energy goods. The company said, they will continue to work with EU leaders to address these issues.

FAQs:

1. What exactly is the Windfall Tax?
   It is an unearned, unanticipated gain in income through no additional expense. A tax imposed in such a situation in profits is called windfall tax.
2. Which all countries are a part of the EU?
   Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.