Fossil fuel giants Shell and ExxonMobil are using secret investor-state arbitration to demand billions in compensation from the Dutch government for closing the Groningen gas field, once Europe’s largest. A new report by SOMO, the Centre for Research on Multinational Corporations, reveals how the two companies are using the Investor-State Dispute Settlement (ISDS) system to evade their responsibility for decades of environmental harm and earthquake damage, while passing the financial burden to taxpayers.
The Groningen case sends a stark warning to governments worldwide as they phase out fossil fuels to meet climate goals. “What’s happening in the Netherlands could happen anywhere,” said Bart-Jaap Verbeek, senior researcher at SOMO. “ISDS gives fossil fuel companies a powerful legal weapon to obstruct climate action, delay the energy transition, and avoid paying for the damage they’ve caused.”
For over 60 years, Shell and ExxonMobil earned nearly €65 billion from Groningen’s gas reserves. Their operations triggered more than 1,600 earthquakes in the Groningen area in the north of the Netherlands, damaging over 122,000 homes. Financial uncertainty, ongoing safety concerns, and long-standing problems with damage compensation have taken a serious toll on residents’ wellbeing, with around 20,000 people suffering from stress-related health problems.
After a damning 2023 parliamentary inquiry, the Dutch government ordered a permanent shutdown of the field and pledged €22 billion for regional recovery. Yet instead of accepting responsibility, Shell and ExxonMobil are seeking compensation for lost profits.
Together with their joint venture NAM, which operated the Groningen field, the fossil fuel giants launched at least four overlapping arbitration cases against the Dutch government between 2022 and 2024. These include: multiple cases at the Netherlands Arbitration Institute (NAI) contesting damage compensation and lost profit claims; and an Energy Charter Treaty (ECT) arbitration filed by ExxonMobil via a Belgian subsidiary – a case the Dutch government is now contesting in Belgian courts due to its incompatibility with EU law.
“This could set a dangerous global precedent, enabling fossil fuel companies to weaponise ISDS to block regulation and intimidate governments,” warns SOMO senior researcher Bart-Jaap Verbeek.
The report calls on the Dutch government to:
· Terminate its 69 remaining bilateral investment treaties with ISDS clauses;
· Reject ISDS in all future trade and investment agreements;
· Support efforts to neutralise the Energy Charter Treaty’s sunset clause, which allows claims for 20 years after withdrawal;
· Ensure that disputes involving public interests are handled in domestic courts rather than in private, behind closed-door arbitration tribunals.