Energy Charter Treaty strikes again as Uniper sues Netherlands over coal phase-out

Brown coal-fired power plant run by Uniper in Datteln, Germany. [FRIEDEMANN VOGEL / EPA-EFE]

German energy company Uniper has confirmed its intention to sue the Dutch government over the country’s planned coal phase-out, in what will be the second legal challenge filed against the Netherlands this year under the controversial Energy Charter Treaty.

Uniper confirmed to EURACTIV its intention to file a claim under the Energy Charter Treaty, saying the Dutch coal phase-out law, agreed in December 2019, violates international law and lacks adequate compensation for affected companies.

The move follows a similar claim filed by German energy giant RWE against the Netherlands in February. Both mean Dutch taxpayers may end up having to foot the bill for the companies’ stranded coal assets.

“I really think the case is an utter scandal,” said Pia Eberhadt, a researcher at Corporate Europe Observatory, who has been following the heavily criticised Energy Charter Treaty.

“These companies should be held accountable for destroying the planet, for ignoring climate science, for lobbying against climate action for decades. But here they are, wanting more public money for being asked to stop destroying the planet,” she said.

According to Uniper, the Energy Charter Treaty is the appropriate platform to discuss the legitimacy of the Dutch coal phase-out act. And there is not yet a claim for compensation, according to Uniper’s parent company, Fortum.

The coal plant in question, Maasvlakte, was commissioned in 2016 when it was already clear that it risked becoming a stranded asset, said Urgewald, an environmental and human rights NGO.

Some EU countries, particularly France and Spain, have also criticised the Energy Charter Treaty, which allows companies to sue countries across borders over decisions that impact their investments or their expected profits.

The Netherlands is finding itself a particular target of claims under the treaty because its planned coal phase-out does not include compensation for energy companies that are losing out on their investments, Eberhadt said.

Last year, the German government agreed to pay €4.35 billion in compensation for German energy companies as part of the country’s plan to phase out coal by 2038. Under the deal, the companies agreed not to sue the German state under the ECT.

According to Eberhadt, Uniper’s move is intended as a warning signal to other governments across the world, which may be tempted to adopt similar coal phase-out policies without compensation.

Germany's RWE uses Energy Charter Treaty to challenge Dutch coal phase-out

German energy giant RWE has used the Energy Charter Treaty to claim compensation from the Netherlands over its planned phase-out of coal from the country’s electricity mix by 2030.

Finnish government should step in

While Uniper is a Germany-based energy company, the Finnish government is the majority owner of its parent company, Fortum, possibly embroiling the Nordic country in the growing storm surrounding the Dutch coal phase-out.

“I do think that the Finnish government should step in,” said Eberhadt, pointing to the country’s coal phase-out date, which is also 2030. “They cannot wipe their hands clean and say they have nothing to do with it.”

Fortum told EURACTIV the decision was made “by the management at Uniper” and has previously said it does not have much influence over Uniper. However, it recently made significant changes to the company leadership, raising questions around its control and endorsement of the suit.

“Fortum showed its true colours,” said Sebastian Rötters, an energy campaigner at Urgewald. “Just a few days ago, the majority owner exchanged the leadership at Uniper. With Fortum managers now in the driver’s seat, Uniper is suing the Dutch state for its barely Paris-aligned coal phase-out,” he said.

Tarnished treaty

The Energy Charter Treaty has faced mounting criticism from NGOs for discouraging governments to take bold action to phase out coal. Without a cap on the amount of compensation awarded, they say it can seriously undermine climate action.

France and Spain are calling on the EU to leave the treaty unless the current attempt at reform is successful. “Either we ensure it is compatible to the Paris Agreement or we need to withdraw from the Energy Charter Treaty,” wrote Spain’s Minister for the Ecological Transition on Twitter.

But there has been little progress towards change and, after the last round of negotiations in early March, Luxembourg energy minister, Claude Turmes, expressed his disappointment at the lack of progress.

A key barrier is that any changes to the treaty must be agreed by all 54 signatories, including countries like Japan and Kazakhstan, which have been reluctant to reform. Eberhadt also criticised the UK for not seeing reform as a priority, saying the EU is alone is its drive to change the ECT.

But leaving the treaty as Spain and France have threatened would not be a complete fix. A sunset clause – called “zombie clause” by critics – means that claims can be filed for 20 years after countries leave.

Leaving would still prevent claims from being filed against new infrastructure though. And a joint withdrawal of EU countries could prevent claims between EU member states, which account for 60-70% of disputes, Eberhadt said.

But not all EU countries are against the treaty, and supporters of reform say a clause could be agreed separately between EU member states not to sue among themselves.

“I think at the moment we are far away from a consensus on withdrawal within the EU, but I hope that’s going to change in the near future,” Eberhadt said. “It might happen when we see more of the cases like RWE or Uniper suing the Netherlands”.

The Dutch government is also placing its hopes in the European Court of Justice, which could rule that intra-EU disputes under the ECT are legal under European law.

In 2018, the Court of Justice declared similar disputes illegal and experts are now looking at whether this acts as precedent for the ECT. Alongside this, Belgium has asked the Court to look into whether the treaty is in line with EU law.

EU pushes for fossil fuel phase-out in 'last chance' energy charter treaty talks

The European Union’s executive will push for a 10-year phase-out of fossil fuel protection under the energy charter treaty (ECT), following calls from some EU countries to quit the accord unless it can be aligned with Europe’s climate goals.

[Edited by Frédéric Simon]

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