Shell has recently initiated an arbitration claim against the Netherlands through a secretive court system, seeking potentially billions of euros in compensation. The British multinational oil and gas company is taking legal action against the Dutch government for its decision to close the contentious Groningen gas field, which has caused numerous earthquakes, economic strain, and extensive damage to homes in the region.
Since the commencement of gas production at the Groningen site in 1963, over 1,600 earthquakes have occurred, leading to significant damage to tens of thousands of homes and leaving residents with financial difficulties, safety concerns, and psychological trauma. Cleodie Rickard, trade campaign manager at Global Justice Now, criticized Shell’s move, stating that while the people of Groningen continue to suffer, mega-polluters like Shell are transferring costs onto taxpayers through corporate courts.
The Investor-State Dispute Settlement (ISDS) claim, filed by Shell in late December, alleges that the Dutch state violated the Energy Charter Treaty. Shell is seeking full compensation for damages resulting from the closure of the Groningen gas field, with associated costs amounting to billions of euros.
This legal action by Shell is part of a series of aggressive litigations brought by fossil fuel companies against the Netherlands following the closure of the Groningen field. Between 2022 and 2024, Shell, ExxonMobil, and their joint venture NAM initiated multiple arbitration cases, with ExxonMobil’s claim via its Belgian subsidiary facing challenges under EU law.
The Energy Charter Treaty, under which Shell is raising its claim, is a commonly used investment agreement that protects energy sector investments and enables companies to challenge climate action measures. ISDS provisions in such treaties allow corporations to sue countries in private tribunals over government policies that they believe harm their business interests.
Despite the UK and the Netherlands formally exiting the Energy Charter Treaty in 2025, existing investments remain protected for a further 20 years under the treaty’s sunset clause, allowing ongoing legal challenges by companies like Shell and ExxonMobil. Campaigners are urging the UK to negotiate agreements with other exiting countries to neutralize the treaty’s sunset clause and prevent challenges to climate action.
In light of recent ISDS claims against the UK, campaigners are calling on the government to exclude ISDS from future trade deals and review existing agreements for renegotiation or termination. The UK’s exit from the Energy Charter Treaty followed public pressure due to its incompatibility with climate goals.
Brendan Montague, an editor at The Ecologist, provides insights into the complex legal battles between fossil fuel companies and governments and the implications for climate action.
