Mass withdrawal from energy investment treaty not imminent, member states say

The Netherlands has announced that it will withdraw from the Energy Charter Treaty, which protects energy investments against unexpected state intervention. Following Spain and Poland, it is thus another country that has recently decided to leave the treaty.

The Energy Charter Treaty is no longer fit for the transition from fossil fuels to renewables, set in motion by the 2015 Paris conference and the so-called Paris Agreement. At least, this is suggested by the recent moves by Spain, Poland and the Netherlands, which have decided to withdraw from the treaty.

In recent years, partly due to rapid developments in the energy sector and the transition to renewables, the treaty has become outdated, according to these countries. It is primarily used by companies in both the fossil fuel and renewable energy sectors to sue governments over regulatory changes that threaten the returns on specific investments.

Discussions on renegotiating the treaty to reflect the current state of the energy sector have not helped either. Negotiations on a new version of the treaty did not result in the approval of a new text.

The Netherlands' intention to withdraw from the treaty was announced by Dutch Minister for Climate and Energy Policy Rob Jetten in the country's parliament. He himself said that he would prefer the Netherlands to withdraw from the treaty together with the entire European Union, which is also a party to the treaty.

"For this reason, the Netherlands, preferably together with the entire EU, will leave the Energy Charter Treaty. The date on which the Netherlands will officially leave has yet to be determined," the spokesperson added.

The treaty concerns cross-border energy investments. It was signed by 50 countries, including all EU member states, in the late 1990s.

It was originally created to protect investments in post-Soviet countries. In recent years, however, it has become controversial because EU countries face legal action over their climate measures. For example, the Netherlands has been sued by German companies RWE and Uniper over its law to phase out coal mining. The legal dispute is still ongoing.

Italy was the first member state to withdraw from the treaty, in 2016. However, it is still engaged in arbitration over a ban on oil and gas project exploration in the Adriatic Sea.