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Energy companies launch legal action over windfall taxes

America’s biggest energy producer is suing the European Union in an attempt to force the scrapping of the bloc’s new windfall tax on oil groups, arguing that Brussels exceeded its legal authority by imposing the levy.

ExxonMobil lodged a lawsuit yesterday in what is regarded as the most significant response yet against the tax from the oil industry, which has been targeted by western governments amid a surge in energy prices after Russia’s invasion of Ukraine in February.

The legal action threatens the future of a levy that the European Commission said would raise €25 billion “to help bring down energy bills”, according to the Financial Times.

It came hours after it emerged that the British government had been threatened with legal action by a wind farm developer over the introduction of its windfall tax. Community Windpower, with eight onshore wind farms, has said it will sue unless the government lifts the planned tax on low-carbon generators, or overhauls the legislation.

It told John Glen, the Treasury chief secretary, that the levy announced in the autumn statement was “unfairly disproportionate” and would hamper its plans to achieve net zero by 2050.

The Exxon lawsuit was filed by the group’s German and Dutch subsidiaries in Luxembourg. It challenges the council of the region’s legal authority to impose the new tax — a power generally reserved for sovereign countries — and its use of emergency powers to secure member states’ approval.

In October Exxon reported net income of $6.75 billion in the third quarter, compared with a loss of $680 million in the same period last year. A spokesman said the company recognised that high energy costs were “weighing heavily on families and businesses”, but argued the levy was “counterproductive” and would “undermine investor confidence, discourage investment and increase reliance on imported energy”. Exxon was now considering “future multibillion-euro investments” in Europe, he said.

The EU levy was followed in November by Britain, which increased its windfall tax on oil and gas producers from 25 per cent to 35 per cent and extended it until 2028. The government said the levy was “not designed to penalise electricity generators”.

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Energy companies launch legal action over windfall taxes

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