ExxonMobil takes EU to court in bid to block ‘counter-productive’ windfall tax

Oil and gas giant has accused the EU of overreaching its authority with move to tax profits amid energy crisis

Oil and gas giant ExxonMobil is suing the European Union over its windfall tax on the profits of energy firms.

The US-headquartered corporation has accused the EU of overreaching its authority, branding the levy on its profits “counter-productive”.

A windfall tax is a levy on large profits that are unforeseen or unexpected. After the Covid pandemic, many energy firms saw their profits soar due to supply shortages.

The price of oil and gas continued to rise after Russian president Vladimir Putin’s decision to invade Ukraine.

Exxon in October reported a $19.7bn profit for the third quarter, outstripping the previous record of $17.9bn recorded in the previous four months.

Ursula von der Leyen, the EU Commission chief, in September, announced a windfall tax on major oil, gas and coal firms.

Officials announced a 33 per cent tax on this year’s profits, which the EU described as a “crisis contribution”.

The UK has also imposed a windfall levy, although the government has faced criticism for including a “loophole” in it that gives firms tax relief in exchange for further oil and gas exploration.

In its legal action against the EU, filed at the bloc’s Luxembourg-based General Court, Exxon claimed that the tax discourages investments and undermines investor confidence.

Exxon in October reported a $19.7bn profit for the third quarter (Getty Images)

"Whether we invest here primarily depends on how attractive and globally competitive Europe will be," Casey Norton, an Exxon spokesperson,  said.

The EU said it had taken “note” of the legal application and that it would be up to the court to decide the outcomes, the Financial Times reports.

In an investor meeting earlier in December, Exxon’s chief financial officer estimated that the EU tax would cost the firm "over $2 billion".

The EU hopes the tax can raise around €140bn (£123bn) from  non-gas electricity producers and suppliers.

The bloc is trying to wean itself supplies from Russia, which is using profits from the oil and gas giant to fund its war effort in Ukraine.