The opinion delivered by the International Court of Justice (ICJ) on state obligations regarding climate change could reshape the legal environment of the oil and gas sector. While non-binding, the opinion introduces an interpretation of international law that potentially exposes stakeholders to new litigation and re-evaluation of already granted exploration or exploitation permits.
According to the Court, a state’s failure to take sufficient measures to limit the use or production of fossil fuels may constitute a breach of international law. The opinion specifically mentions the granting of exploration permits or subsidies for fossil fuels as potentially unlawful under climate commitments.
A more uncertain legal framework for industry players
For companies operating in hydrocarbons, this development adds regulatory uncertainty and could influence investment decisions. National courts may now invoke the ICJ’s opinion to challenge permits or ongoing projects, particularly in countries where international law is directly applicable, such as the Netherlands or France.
Several legal experts believe the opinion will also affect commercial disputes, especially in cases where investors challenge states over the withdrawal or suspension of exploitation licences. This risk is heightened when new climate pledges contradict existing regulatory frameworks.
Potential international-level litigation
In dualist legal systems, where international law requires transposition, the influence remains indirect but tangible. Constitutional courts may rely on the ICJ’s interpretive authority to justify rulings unfavourable to oil companies. The Court’s recognition of an “existential threat” reinforces the ability of vulnerable states to seek redress from polluting nations before international tribunals.
The opinion could also serve as a defence for countries facing claims from corporations after altering their climate policies. Italy’s condemnation to compensate an oil operator for revoking a drilling permit illustrates the growing complexity of balancing energy sovereignty and climate obligations.
Expected impact on contracts and arbitration
The opinion’s reach is likely to affect stability clauses and legal guarantees traditionally embedded in agreements between governments and energy operators. Financial institutions may also reconsider their risk assessment models for fossil fuel projects, anticipating challenges to the legality of funded developments.
“It will be more difficult to claim a legitimate expectation to operate a fossil fuel project without obstruction,” said Lorenzo Cotula, an expert in international law. Legal risk assessment now explicitly integrates climate considerations, with potentially lasting effects on the structure of the global oil and gas market.
