60th anniversary of Dutch bilateral investment treaties no cause for celebration
On 23 May, the Netherlands celebrates 60 years of bilateral investment treaties (BITs). The first BIT was signed with Tunisia in 1963. These treaties were intended to make an important contribution to protecting foreign investments by Dutch companies. A study by SOMO, Both ENDS and the Transnational Institute (TNI), however, shows that in practice they mainly give multinationals a powerful instrument that has far-reaching consequences people and the environment worldwide.
The study shows that the Netherlands is a real 'claim paradise' for multinationals. Companies use the Dutch BITs to lodge claims against countries that introduce legislation that harms their investments. This especially has negative consequences for people living in the Global South. Despite the Netherlands drawing up a new model to renegotiate these treaties in 2019, in reality nothing has yet changed. The three organisations call on the Netherlands to cancel all investment treaties.
The Netherlands plays a dubious pivotal role
The study by SOMO, Both ENDS and TNI shows that, as a conduit country for international capital flows, the Netherlands plays an important pivotal role in facilitating these kinds of claims. Companies that on paper are located in the Netherlands can easily lodge claims using Dutch BITs. No less than 40% of investments in countries with which the Netherlands has a BIT are made by 'letterbox companies'.
106 cases have already been initiated through Dutch BITs, worth a total of 105 billion dollars. That makes the Netherlands the second most popular country, after the United States, for lodging claims.
The majority (71%) of claims are submitted by letterbox companies of multinationals that take advantage of the Netherlands' treaties. Half of all the 'Dutch' claims are submitted by large companies with an annual turnover of more than a billion dollars, and rich individuals with personal capital of more than 100 million dollars. The fossil industry is one of the most active sectors in lodging claims under the Dutch BITs, accounting for a fifth of the total. The industry has claimed more than 55 billion dollars in compensation, of which 11.5 billion has already been paid out.
'Throughout 60 years of BITs, the Netherlands has played a major role in strengthening the power of multinationals worldwide,' says SOMO researcher Bart-Jaap Verbeek. 'In a world of rising inequality, support should be given not to the richest but to the people who need it the most.'
After having left the ECT, the Netherlands must also cancel its BITs
The climate panel of the United Nations warned last year that investors in fossil fuels can use the Investor-State Dispute Settlement (ISDS) mechanism to challenge climate legislation. The Netherlands has experienced this at first hand with the billion-dollar claims lodged by German energy companies RWE and Uniper via the Energy Charter Treaty (ECT) after the Dutch government's decision to close all coal-fired power stations from 2023 so as to achieve the Paris climate goals.
Because of the impact on its own climate policy, the Netherlands decided at the end of last year to leave the ECT. The three organisations say that the logical next step is to review the 75 existing BITs with ISDS. Companies like Shell, ExxonMobil, Total, ConocoPhillips and Eni have used Dutch treaties to lodge complaints against countries like Nigeria, the Philippines, Uganda and Venezuela in order to receive huge amounts of compensation for a variety of measures in the oil and gas sector.
''It is untenable for the Netherlands itself to leave an international treaty with ISDS because of the claims against our government," says Bart-Jaap Verbeek, "and still to play a pivotal role in claims against governments in the Global South."
What are bilateral investment treaties?
BITs are agreements between two countries intended to promote investments and protect them against unpredictable actions by overseas governments. The Netherlands now has 75 BITs with various countries around the world.
But these treaties make it more difficult for governments to introduce laws and rules to protect the environment, labour rights and public health. That is because BITs give investors the right to lodge claims against a government through the ISDS system if they believe that the new legislation causes harm to their investments.
That can lead to situations in which governments are forced to pay large sums of money to investors, or to withdraw legislation that is in the common interest. Moreover, as the costs of conducting legal proceedings against an investor are very high, many countries in the Global South fall victim to the 'legal blackmail': the threat of legal proceedings alone can persuade governments not to take action in the interests of their people, such as stricter environmental regulations or climate policy.
The report 'Dutch Bilateral Investment Treaties: 60 years of protecting multinationals'
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