A legal challenge by the operator of the Corrib gasfield off the west coast over the energy sector windfall gains tax is to be referred to the Court of Justice of the EU (ECJ).
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, Climate and Communications, Ireland and the Attorney General. The case came before the High Court earlier this year and, on Tuesday, Mr Justice Michael Quinn agreed to a request from the parties to have the matter referred to the European Court of Justice.
Michael Cush SC, for Vermilion, said the reference would seek the European court’s guidance on the interpretation of EU law in relation to legislation introduced here giving effect to an EU regulation on emergency intervention to address high energy prices. Energy prices spiked after the Russian invasion of Ukraine in February 2022.
[ Vermilion brings High Court challenge over windfall gains tax on energy sectorOpens in new window ]
Under the windfall gains tax, 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 greater than 20 per cent average taxable profits and member states could decide whether or not to include 2022.
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Vermilion says it is contrary to law.
Following constructive engagement between the sides, the questions to be sent to the ECJ have been virtually agreed as has a statement of fact, he said. It was hoped the Irish reference could be dealt with along with a similar reference from Belgium.
In outlining the background to the case, Mr Cush said there were serious upfront costs of some €3.65 billion in opening the Corrib field, the only active natural gasfield in the State.
Corrib came on stream in December 2015 and, in 2021, the year before the adoption of EU regulation, Vermilion had losses of €1.6 billion, he said. Under Irish tax law, energy companies can carry forward losses against future trading profits indefinitely.
[ Russian air attack damages Ukraine’s energy infrastructureOpens in new window ]
Given the lifespan of Corrib, it is possible they would never have been liable to pay corporation tax although this is to be viewed with caution, counsel said.
Due to the war in Ukraine, the EU adopted the resolution to mitigate the effect of high energy prices, he said.
Catherine Donnelly SC, for the defendants, said that while her side was not objecting to the referral to the ECJ, her clients were satisfied as to the validity of the legislation.
Counsel also said that while there was an agreed statement of facts for the purpose of a referral, there were many disputed facts between the parties. These include that there is no proof that Vermilion has not earned a profit.
Mr Justice Quinn said he was satisfied the referral should be made and this could be formally done on Wednesday.
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