ISDS infringement complaint filed with the European Commission

What is this about?

HandelAnders, SOMO and Both ENDS are calling on the European Commission to start a so-called infringement procedure against The Netherlands over incompatibility between its bilateral investment treaties (BITs) and EU law. They are hereby joining a European coalition of CSOs from France, Austria, Germany and Sweden who have filed similar complaints in their respective countries in December 2025. The infringement complaints contend that 1) the overwhelming majority of BITs, in particular those signed before 2009, are incompatible with EU law because they allow investors to sue EU Member States outside of the EU legal system and 2) the majority of BITs are incompatible with EU sanction powers, because sanctioned businessmen can invoke capital transfer clauses to seek compensation from EU Member States. 

Why now?

This is particularly pertinent now, because in July 2026, it emerged that a Russian oligarch is using  the Netherlands – Russia BIT from 1989 to sue The Netherlands over sanctions resulting from the Russian war of aggression against Ukraine. In other EU countries as well, sanctioned Russian investors are invoking free-transfer provisions against EU Member States implementing EU sanctions (Fridman v Luxembourg) or are likely to do so (Euroclear/Belgium). See the 2025 report Frozen Assets, Hot Claims for a comprehensive overview.

At the same time, globally the call is growing to revise and reform unfair trade- and investment agreements that accord investors disproportionate rights, for instance through investor-state dispute settlement (ISDS). ISDS was a central theme at the recently organized conference on Transitioning Away from Fossil Fuels (TAFF) in Colombia. 

What is the legal basis for this?

Procedural

HandelAnders, SOMO and Both ENDS point to a violation of Art. 4(3) TEU, resulting from The Netherlands’ failure to take appropriate steps to eliminate the incompatibilities between its bilateral investment treaties concluded with third countries (BITs) and the autonomy of EU law (1) as well as the EU’s sanction powers (2). They are calling on the Commission to initiate an infringement procedure against The Netherlands under Art. 258 TFEU.

Content

The incompatibility of EU countries’ investment treaties with EU sanctions policy has already been highlighted by the European Court of Justice in 2009. In three rulings against Austria, Sweden, and Finland, it found that capital transfer clauses in the three countries’ investment treaties conflict with the Council’s authority to unilaterally impose sanctions on third countries. However in the years since then, the countries and other EU Member States with similar clauses in their treaties have failed to remedy the situation. They have not renegotiated their treaties to include safeguards, nor have they cancelled them.

What are the consequences of this complaint?

Only the European Commission can actually initiate an infringement procedure against an EU Member State. EU citizens and organizations can call on the European Commission to do so, however the Commission is not obliged to act. Upon reception of our complaint, the Commission will have to decide how and in what form it will further pursue this case.

What should The Netherlands do according to the complainants?

HandelAnders, SOMO and Both ENDS call on The Netherlands to terminate or amend existing investment treaties to bring them in line with European law. In practice, this means getting rid of problematic clauses in investment treaties – in this case, investor-state dispute settlement (ISDS), which allows investors to sue governments outside of the European legal system and provisions on capital transfer, which contradict the autonomy of EU law and the EU’s sanction powers. See also Phasing out ISDS in the Netherlands: a roadmap.

What are the risks of ISDS for countries in the Global South?

The overwhelming majority of ISDS claims in the fossil fuel and mining sectors are brought by investors from the global North against states in the Global South. These claims put disproportionate pressure on those countries' public finances and limit their capacity to enact policies in the public interest. For the Global South, already vulnerable to climate and debt shocks, the threat of ISDS therefore exacerbates obstacles to effective policymaking.

Notes

1. https://europeantradejustice.org/wp-content/uploads/2025/12/FrozenAssetsHotClaims-sanctionsISDS_jointBriefing_Dec2025.pdf

2. "The Member States shall facilitate the achievement of the Union's tasks and refrain from any measure which could jeopardise the attainment of the Union's objectives."

3. "If the Commission considers that a Member State has failed to fulfil an obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations."

4. https://www.bothends.org/en/Whats-new/News/New-report-Phasing-out-ISDS-in-the-Netherlands-a-roadmap/