Rockhopper Exploration has started a legal dispute with Italy to protect its investment in the Ombrina Mare project in the Adriatic.
The UK Mediterranean and Falklands focused oil and gas explorer said it has launched international arbitration proceedings against the Republic of Italy following the ministry of economic development's decision in February 2016 not to award the company a production concession covering the Ombrina Mare field.
The Aim-listed firm said: "The company, with its legal advisers, has considered its options with regard to obtaining damages and compensation from the Republic of Italy for breaching the Energy Charter Treaty (ECT)."
The ECT is designed to provide a stable platform for energy sector investments.
Sam Moody, chief executive of Rockhopper, said:
Whilst we had hoped to avoid arbitration, we are extremely disappointed that it has proved to be necessary in order to protect our investment in the Ombrina Mare project.
While it may take some time to produce a result, and there is no certainty of success, Rockhopper is taking all necessary steps to protect its shareholders' interests at no extra cost to the company.
Rockhopper said it has been advised it has "strong prospects of recovering very significant monetary damages", which will be sought on the basis of lost profits.
The firm added it has secured non-recourse funding for the arbitration from a funder that specialises in financing commercial litigation and arbitration claims.
"In the event of success (with an award above a nominal threshold) Rockhopper retains a very material proportion of any award," it said.
Italy's ministry of economic development did not immediately respond for comment.
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