Dutch bilateral treaties play a key role in court cases filed against developing countries by multinationals, whenever they believe a new set of regulations hurts their interests. More than 10 percent of all known claims are based on a Dutch Treaty, of which three out of every four by companies whose only presence in the Netherlands is a mailbox.

This is documented by the report "Socialising Losses, Privatising Gains", which was released by SOMO, TNI, Both ENDS and Milieudefensie today. Three out of four "Dutch" cases are filed by letterbox companies, who are only located in the Netherlands for legal or tax reasons.

Environmental Rules

The fines can be high

Investment treaties or BITs (bilateral investment treaties) offer extensive protection to investors. Whenever they believe to suffer from a change in government policy, they can claim billions from a country via Investor-State Dispute Settlements, or ISDS. This is one of the elements in the current negotiations, between the European Union and the United States, on free trade agreement TTIP, which is heavily contested by civil society organisations.

Many cases are about new environmental legislation, or measures to improve public health or financial stability. The arbitration is usually performed by three people, behind closed doors, and costs (including legal) average about 8 million USD (7 million EUR).

The fines can be high. This doesn’t only affect developing countries. Chinese insurer Ping An, e.g., claims 2 billion USD (1.8 billion EUR) in damages for alleged losses at Belgium’s nationalisation of [bankrupt bank] Fortis.

Undermining decision-making

"This directly undermines democracy in these countries."

"It’s not just fines," says Roos Van Os, a researcher at SOMO. "This directly undermines democracy in many countries because it instills a ’regulatory chill’. For fear of claims, some countries reverse decisions on rules that came about democratically." This undermines these countries’ policy options for sustainable development.

Indonesia, for instance, wants to become less reliant on exporting raw materials. It therefore decreed that 51 percent of mining companies’ shares be sold to Indonesians, and that companies process raw materials partly in Indonesia. Mining giant Newmont filed a claim on the basis of an investment treaty which the Netherlands had concluded with Indonesia. In the end, Newmont will be exempt from the new law.
Dutch treaties have been used to indict Zimbabwe following agricultural reforms, Bolivia on its policy over ownership of water, and Venezuela following the nationalisation of its coffee and oil production.

Aggressive

"The Netherlands are one of the most aggressive players when it comes to ISDS," says Van Os. The Dutch official who was responsible for this, Nikos Lavranos, is the current Secretary General of lobby organisation EFILA (European Federation for Investment Law and Arbitration). This organisation advocates even stronger ISDS-mechanisms, which should further restrict states’ policy freedoms.

Dutch insurer Achmea has filed a case against Slovakia, because it wants to make health care insurance a public issue again. It is a unique case, because the company does not want money, but just wants the proposal off the table. Slovakia has previously had to pay 22 million USD (19 million EUR) plus 3 million USD (2.6 million EUR) to Achmea, in damages for a new law which limits the ability of insurers to channel profits out of the country. "This system is in fact a parallel constitutional state, tailored to the specific needs of multinational enterprises", says Van Os.

Terminations

Faced with the violations of policy freedoms by BITs and ISDS, South Africa, just like Indonesia, recently unilaterally terminated its BITs with a number of countries. The ones with the Netherlands were the first to be aborted. Recently, India announced, partly as a result of a multi-billion claim by Vodafone (based on the Dutch-Indian BIT), a total revision of its current investment treaties. The problem is that, according to the treaty, investors retain protection up till 15 years after its termination.

Liliane Ploumen, the Dutch minister of trade and development cooperation, has previously indicated that current BITs with developing countries will be looked into again. In previous statements, however, she had already informed us that she has no objections against the ISDS mechanism, albeit in an improved form.

Article by Frank Mulder (IPS), originally published in Dutch on the website of MO* Magazine, 30 January 2015