Arcelormittal’s Italian venture runs into legal woes
Arcelormittal said this week it was withdrawing from a deal to buy Italy’s struggling steel firm Ilva after the government scrapped previous guarantees of legal immunity during an environmental clean-up at its plant. The decision puts at risk thousands of jobs in Italy’s underdeveloped south, threatens supply for Europe’s second-largest steel consumer, and has led to ructions within the ruling coalition. Here is an explanation of what has gone wrong and why the issue is so important for Italy.
WHAT IS ILVA? : Ilva was founded in 1905. Its biggest plant, and the largest in Europe, took root in the southern city of Taranto in the 1960s. At its peak, the site produced more than 10 million tonnes of steel a year, but following scandals over its appalling environmental record it was placed under state-supervised administration in 2015.
After months of negotiations, steel giant Arcelormittal (AM) took control of Ilva in 2018. The firm currently has some 10,700 employees, with 8,200 in Taranto and most of the others in two finishing facilities in northern Italy. Under the deal, AM agreed to pay 1.8 billion euros ($2 billion) for Ilva. It also pledged to spend 1.2 billion euros between 2018-23 on an environmental clean up and 1.3 billion to boost production at Taranto to 8 million tonnes per year from 6 million.
WHAT HAS GONE WRONG?: AM’S main complaint is that the government has removed a pre-existing legal shield that granted it immunity from prosecution over environmental risks while it carried out the clean-up at Taranto.
Locals afflicted by pollution said this left them without legal redress and was therefore unlawful. A local judge backed their complaint and the ruling 5-Star Movement, which had promised to shutter Ilva before entering government in 2018, introduced a clause in a decree in June to remove the safeguard.
Arcelormittal said if the decree was approved, it would pull out of the purchase and initially the government promised to backtrack. But, under pressure from 5-Star lawmakers, the promise failed to materialise and the shield expired on November 3.
WHY DO THEY WANT A LEGAL SHIELD? Experts say environmental norms were ignored at the site for decades, leaving Taranto exposed to highly toxic pollutants. One report drawn up by a group of medical experts found that between 2005 and 2012, more than 3,000 deaths were directly linked to exposure to pollutants. Locals say there have been hundreds more deaths since then. Arcelormittal says it cannot run the risk of law suits tied to the pollution before it has had a chance to clear up the mess and make the site safe.
WHAT HAPPENS NOW?: If AM does pull out, the case will end in court. In the meantime, the government would have to take the site back and presumably seek a new buyer or nationalise it. The coalition would also face a huge political backlash.