Both Ends | 23 May 2023
Dutch bilateral investment treaties: 60 years of protecting multinationals
On 23 May 1963, the Netherlands signed its first bilateral investment treaty (BIT). It was signed with Tunisia, and intended to make an important contribution to protecting foreign investments by Dutch companies. Nowadays, the Netherlands has 75 bilateral investment treaties with countries all over the world. A study by SOMO, Both ENDS and the Transnational Institute (TNI), however, shows that in practice they mainly give multinationals a powerful instrument that has far-reaching consequences for people and the environment worldwide.
Main points of the research
– Over the past 60 years the Netherlands has set up a network of 75 bilateral investment treaties (BITs) with other countries, mainly in Asia, Africa and Latin America.
– These treaties were signed with the pledge to promote foreign investment and economic growth. But they are mainly used by multinational corporations to lodge complaints under the Investor-State Dispute Settlement (ISDS) mechanism and demand compensation for measures that negatively impact on their profits, including measures taken in the common interest.
– The Netherlands is an important conduit country for worldwide investments. More than 40 percent of outgoing Dutch investments in BIT partner countries are structured through shell companies or Special Purpose Entities (SPEs). In some countries, this is the case for almost all investments.
– Dutch BITs are notorious for their investment-friendly conditions and for making treaty-shopping possible. With a total of 106 known cases under Dutch BITs, the Netherlands is the second most popular home state for ISDS after the United States. Foreign investors making use of Dutch BITs have lodged claims amounting to 105 billion dollars. Tribunals have already awarded 18.2 billion dollars in compensation. These sums impose a considerable financial burden for governments and can undermine their capacity to provide their people with crucial public services.
– 71 percent of ISDS cases initiated under Dutch BITs are lodged via SPEs. A further 5 percent are submitted by other entities that are not SPEs and which have developed substantial commercial activities and employment in the Netherlands. This means that more than three quarters of cases are initiated by non-Dutch investors.
– In half of the cases, the claims are lodged by companies with an annual turnover of more than 1 billion dollars and individuals with net capital of more than 100 million dollars. Extra large corporations with an annual turnover of more than 10 billion dollars account for 26 percent of cases. Only 8 percent are submitted by companies with less than 100 million dollars in annual income.
– Of the 106 cases, 21 (20 percent) are related to the fossil industry, accounting for more than 55 billion dollars in claims, 11.5 billion dollars of which have already been awarded. Such claims can jeopardize energy and climate policy in the host countries.
– A small group of arbitrators deals with most of the claims under Dutch BITs. The eleven most appointed arbitrators are involved in 82 of the 106 cases (72 percent). Almost all of these arbitrators come from the Global North (Europe, Canada and Australia).
– Instead of focusing on the extensive and uncertain renegotiation of 75 BITs on the basis of a new model that continues to be based on ISDS and to provide protection for fossil fuels, the Netherlands should aim to cancel the existing treaties in the short term, in consultation with the partner countries to create the policy space required for sustainable development.