SOMO | 1 November 2023
Energy giant RWE withdraws billion-euro claim against the Netherlands
by Bart-Jaap Verbeek
German energy company RWE has announced its intention to withdraw its international arbitration proceedings against the Dutch state at the International Centre for Settlement of Investment Disputes (ICSID). The company initiated these proceedings on 2 February 2021 based on the Energy Charter Treaty (ECT), claiming €1.4 billion as compensation for expected damages due to the law that bans coal-fired power generation from 2030.
RWE’s decision to withdraw the case follows the appeal ruling by the German Federal Court of Justice in Karlsruhe on 27 July. The German court confirmed that under EU law, the ECT’s arbitration clause cannot be a valid basis for an arbitration agreement. Earlier, the European Court of Justice came to a similar conclusion.
“This is excellent news and a wise decision by RWE. Instead of engaging in costly rearguard battles, climate-polluting energy companies would do better to cut their losses and look to the future by fully engaging in renewable and clean forms of power generation.”
The German energy company Uniper had earlier withdrawn similar arbitration proceedings at the request of the German state. RWE’s decision now puts a definitive end to international arbitration proceedings against the Dutch coal law.
RWE and Uniper now only have their appeals in national proceedings pending. Late last year, the District Court of The Hague ruled that the coal law was “lawful, proportionate and foreseeable” and that the Dutch state, therefore, does not have to pay compensation to the owners of the coal-fired plants. In the appeal, RWE invoked the ECT’s investment protection. This is the first time the ECT has been used in a case before a national court.
RWE recently received compensation of €331.8 million for the temporary limitation of coal production in 2022. The Dutch government had imposed this production limitation to comply with the Urgenda verdict.
The ECT has come under fire in recent years. The treaty offers far-reaching protection to investors in the energy sector, making it a significant obstacle to the energy transition.
The Netherlands indicated last year that it wanted to leave the treaty because it is incompatible with Dutch and European climate goals. A growing number of EU member states, as well as the European Commission and the European Parliament, want out of the treaty.
A qualified majority in the Council is needed to reach a joint EU exit. As some member states want to remain part of the ECT for the time being, the EU has yet to take a common position. The next ECT conference is scheduled for 20 November 2023.