For years, companies based in the Netherlands have been major users of the controversial international energy treaty ECT. On the basis of a special clause therein, they submit one million claim after another against governments abroad, because their investments in (fossil) energy projects there would be jeopardized by, for example, new climate policy. The 1994 treaty – when free trade and investment treaties reigned supreme – gives companies the opportunity to litigate against states outside the usual national legal order. This is done at a special arbitration tribunal of the World Bank in Washington. And the claims there are sometimes shockingly high. Things regularly turn out in favor of the companies. But now the Netherlands has decided to withdraw from the treaty . The government believes that the ECT, and especially the arbitration option, stands in the way of the fight against global warming. International cooperation The treaty was once concluded to simplify international energy cooperation, and to make it easier to invest in other countries by giving them extra protection. In practice, however, the arbitration option in particular gives companies a disproportionate amount of power vis-à-vis states, critics say. This makes climate policy very complicated, expensive and time-consuming. The fear is that sometimes the threat of procedures alone deters governments from making ambitious policy. Minister Rob Jetten (Climate and Energy, D66) stated on Tuesday that the goals of the Paris Climate Agreement may not be achieved because of this. Waiting for the treaty to be amended, which has been discussed for some time, is not enough, he believes. Eastern European countries do not yet see such a change, as does Germany, also avid use of the arbitration option. And adjustments require unanimity. And so Jetten sees no other option than to cancel. In doing so, he joins a growing group of disaffected people. Spain announced last week that it would withdraw from the treaty. Italy is already out. Poland is working on it, and France is thinking about it. It is not yet clear when the Netherlands will withdraw. But the decision is final, says Jetten. Claims against the Netherlands The cabinet itself was recently burdened by the treaty in a different way. Two large foreign energy companies made claims because in their view unforeseeable Dutch climate policy would endanger their investments. For example, the German energy company RWE went to the arbitration tribunal in Washington because the cabinet had decided to stop power plants from using coal early. RWE owns a coal-fired power station that has been open since 2015 and claims 1.4 billion euros in compensation from the state. The Dutch government itself is said to have insisted on opening that power station. The German gas giant Uniper also filed an arbitration case. Uniper also owns a coal-fired power station in the Netherlands. The company has since withdrawn its claim, under pressure from the German government, after it ran into distress from the energy crisis and had to be bailed out by the state. For companies from the Netherlands that are active abroad, the withdrawal is a setback. They can no longer use the clause to protect their investments elsewhere. Only companies from treaty countries have that right. Environmental and social organizations are positive about the move by the Netherlands. Just last week, a collective of twelve organisations, including Urgenda, Milieudefensie, Greenpeace and the trade union FNV, urged the cabinet to quickly withdraw from the treaty. SOMO, a foundation that conducts research into multinationals,speaks of a ‘historic decision’ and ‘a victory for the climate’. Operation continues With the denunciation by the Netherlands, the effect of the treaty has not yet come to an end. Foreign companies active here can go to the tribunal for another 20 years after withdrawal, and ongoing cases continue. It is a new blow for the treaty. The pressure on other European countries to leave has increased; The Netherlands was previously one of the most ardent proponents of the ECT. That also makes the tournure symbolically important. If the EU as a whole withdraws from the treaty, there will be little left. In any case, the risk for governments of making costly claims if they want to fight climate change is diminishing. The majority of disputes now concern business-state matters within the EU. Also read: how an old treaty can seriously hinder European climate ambitions