Aftershock in Groningen
SOMO | 2 July 2025
Aftershock in Groningen
by Bart-Jaap Verbeek
Shell and ExxonMobil are using secret arbitration proceedings to demand billions in compensation from the Dutch government following the closure of the Groningen gas field, once Europe’s largest. In a new report, SOMO reveals how the companies are attempting to shift the financial costs of decades of gas extraction and earthquake damage onto the public. The case sends a stark warning to other countries facing the complex challenge of phasing out fossil fuels: fossil fuel companies are increasingly weaponising arbitration to obstruct transition efforts and avoid accountability.
Key insights:
- Shell and ExxonMobil are pursuing multiple overlapping arbitration cases, based on investor-state contracts and the Energy Charter Treaty, to demand billions in compensation for the closure of the Groningen gas field.
- The companies are also contesting their financial liability for decades of earthquake damage, despite earning nearly €65 billion from Groningen gas extraction.
- The arbitration cases threaten to drain public funds that should go towards Groningen’s recovery and redevelopment.
- By using this legal tool, key public interest disputes over Groningen are being decided behind closed doors in private tribunals.
- These legal actions are part of a global trend where fossil fuel companies weaponise investor-state dispute settlement (ISDS) to obstruct climate action, delay fossil fuel phase-outs, and evade accountability for environmental and social harm.
- SOMO calls for urgent policy change and urges the Dutch government to terminate its remaining 69 ISDS treaties, reject ISDS in all future trade and investment agreements, and ensure that public interest disputes are handled in domestic courts.
Read the full report: Aftershock in Groningen (pdf, 3.21 MB)
Over the course of sixty years, Groningen became the backbone of the Dutch economy – and the epicentre of a slow-burning disaster. Since gas production began in 1963, more than 1,600 earthquakes have damaged tens of thousands of homes, leaving residents in the region with financial stress, safety concerns, and psychological trauma.
In 2023, a Dutch parliamentary inquiry concluded that the state and energy companies had consistently prioritised economic gain over public safety. The inquiry declared a “debt of honour” owed to the people of Groningen. A year later, the government formally ordered a permanent shutdown of gas extraction.
But instead of accepting responsibility, Shell and ExxonMobil responded with legal action – invoking investor-state dispute settlement (ISDS), a controversial mechanism that allows investors to sue governments behind closed doors when public policies are alleged to harm profits.
Legal challenges to phase-out and liability
Between 2022 and 2024, Shell and ExxonMobil – together with their joint venture NAM, which operated the Groningen field – launched four partially overlapping arbitration cases, including:
- Two NAM-led cases at the Netherlands Arbitration Institute (NAI), contesting levies for damage compensation and home reinforcement;
- A separate NAI case by Shell and ExxonMobil over the terms of the Groningen phase-out
- An Energy Charter Treaty (ECT) arbitration filed by ExxonMobil via its Belgian subsidiary – a move that contravenes EU law, according to the European Court of Justice’s Komstroy ruling.
The companies argue they are entitled to compensation for lost future profits and are disputing their liability for repair costs, despite earning nearly €65 billion from Groningen operations over the past six decades. The Dutch government, meanwhile, has committed €22 billion to a long-term recovery and redevelopment plan for the region (Nij Begun) – a plan that now risks being compromised as scarce public resources may be redirected to cover arbitration claims.
Interim decisions raise concerns
In early 2025, an interim ruling by a NAI tribunal granted Shell and ExxonMobil expanded access to audits and government reporting related to damage claims. This raises concerns about public oversight and could give the companies, still financially responsible for ongoing damage, an inappropriate role in how clean-up costs are calculated and monitored.
The financial risks are significant. A large arbitration award could divert public funds urgently needed for regional recovery, home reinforcement, and long-delayed compensation for victims of earthquake damage.
“Shell and ExxonMobil are effectively trying to get paid while Groningen residents are still waiting for justice”. Bart-Jaap Verbeek, SOMO senior researcher.
Treaty shopping and legal pressure
ExxonMobil’s use of its Belgian subsidiary to file the ECT claim is a textbook case of “treaty shopping” – a tactic where companies route legal claims through subsidiaries in jurisdictions with favourable investment treaties. The move appears to violate EU law, and the Dutch government has initiated court proceedings in Belgium to stop the case.
ExxonMobil has also requested provisional measures in the ECT arbitration. Although the specific request remains undisclosed, it raises concern – especially given ExxonMobil’s earlier (rejected) attempts in Dutch courts to suspend its payment obligations. If granted, such measures could delay or weaken the state’s ability to enforce corporate liability during the arbitration process.
Shell, too, has formally threatened to file a claim under the ECT, further escalating legal pressure on the state. The existence of multiple, parallel proceedings raises the risk of double jeopardy and recovery, where the same claims could be awarded in different forums.
Chilling effect on future climate and energy policy
The Groningen cases are already casting a long shadow. SOMO’s report warns that the financial and political risks associated with these cases could deter future government action on other gas projects in the Netherlands, such as in Warffum or beneath the UNESCO-protected Wadden Sea –areas with high seismic or environmental sensitivity.
“This is not just about Groningen. ISDS gives fossil fuel companies a powerful tool to delay the energy transition, block regulation, and avoid responsibility for the damage they cause. It’s a global problem with local consequences.” Bart-Jaap Verbeek.
A turning point for the Netherlands?
The report notes that the Netherlands, once a vocal proponent of ISDS, is now facing the consequences of the very system it helped construct. SOMO calls on the Dutch government to take the lead in dismantling the ISDS regime by:
- Terminating its 69 remaining bilateral investment treaties with ISDS clauses;
- Rejecting ISDS in all future trade and investment agreements;
- Supporting efforts to neutralise the Energy Charter Treaty’s sunset clause, which allows claims for 20 years after withdrawal;
- Ensuring that disputes involving public interests are handled in domestic courts, not private arbitration tribunals.
A broader warning
The Groningen case sends a stark warning to other countries navigating the complex challenges of phasing out fossil fuels. As governments introduce policies to address environmental damage and meet climate goals, fossil fuel companies are increasingly using ISDS to obstruct these efforts and avoid accountability.
By enabling corporate legal attacks on public interest decisions, ISDS shifts the costs of transition from polluters to the public, including the very communities most affected by extractive industry harm.
Without transformative action, ISDS will remain a powerful tool for fossil fuel companies to block climate action, intimidate governments, and undermine justice for people living on the frontlines of the energy transition.
Read the full report: Aftershock in Groningen (pdf, 3.21 MB)
