Why a just transition to a more sustainable future needs better law

The world's governments increasingly agree, at least in principle, that fossil fuels need to be phased out. But the legal system that protects foreign investment was built for an earlier era, and it makes the process astonishingly expensive for the states trying to realise it, with the costs falling unevenly on those least responsible for the problem. 

What happened in Santa Marta? 

The gathering used a recent international milestone as its starting point. In April 2026, Colombia and the Netherlands co-hosted the Santa Marta conference. The conference is explicitly aimed at building international cooperation on moving away from fossil fuels. The conference deliberately created distance from the fossil-fuel-heavy states and lobbyists that have historically dominated international climate negotiations under the United Nations' Framework Convention on Climate Change (UNFCCC), instead opening deliberate space for trade unions, Indigenous communities, sub-national governments, and civil society groups to contribute their perspectives.  

Siobhán Airey, Assistant Professor for Innovation of Public Law at Erasmus School of Law, described this as a welcome and long overdue shift. "Climate governance is entering a new phase," she says, pointing to recent rulings from international courts that have clarified what states are legally required to do with regard to climate change. Initiatives like Santa Marta, she adds, ''reinforce the cross-sectoral momentum'' building ahead towards the next COP – the UN's annual climate conference - which will be held in Antalya, Turkey, later this year. The shift, she noted, ''may well influence governance processes at EU and national levels, for example, on phasing out fossil fuel subsidies.'' 

The legal obstacle most people don't know about.  

Most people assume that if a government decides to phase out fossil fuels, it can simply do so. In practice, it can be extraordinarily costly, not because of the transition itself, but because of a legal mechanism that most people have never heard of: Investor-State Dispute Settlement, or ISDS. 

ISDS allows foreign companies to sue governments directly before international arbitration panels when a new law or policy is seen to harm their investments, bypassing domestic courts entirely. These cases are typically brought under bilateral investment treaties, legal agreements between two countries originally designed to encourage and protect foreign investment. 

The financial stakes are enormous. Research has estimated that climate-related measures affecting oil and gas projects could expose states to ISDS claims running into the hundreds of billions of dollars worldwide. Fossil fuel investors have already been awarded more than 80 billion dollars through these mechanisms. For many governments, particularly in the Global South, the mere threat of an ISDS claim can be enough to delay or water down climate legislation. 

The Netherlands - leading transition diplomacy but offsetting it in ISDS? 

The Netherlands offers a striking example of this tension. "The Netherlands stood at Santa Marta modelling a new kind of climate diplomacy," says Alessandra Arcuri, professor of International and European Union Law at Erasmus School of Law, and member of the academic group who advised governments in Santa Marta. "At the very same time, it is on the receiving end of multiple ISDS claims brought by fossil fuel companies challenging its own climate and energy policies." 

The Netherlands has taken steps to address this, including announcing its withdrawal from the Energy Charter Treaty, a multilateral agreement long criticised as a barrier to decarbonisation. But its extensive network of bilateral investment treaties remains largely intact, meaning the underlying legal exposure has not gone away. 

Arcuri also highlights a deeper imbalance in how the system currently works. Investors can claim compensation from states, but there is no equivalent legal route for the communities harmed by fossil fuel extraction. Governments may have to pay significant sums of taxpayer moneys to fossil corporation under ISDS and may accordingly hesitate to introduce new climate legislation. That may be starting to change: in May, the UN General Assembly adopted a resolution, recognising a landmark advisory opinion from the International Court of Justice in The Hague on states' obligations to protect the climate. "We hope that with the adoption of this resolution, Arbitral Tribunal adjudicating Investor-State disputes will weigh more seriously states’ duty to adopt climate law and phase out fossil fuels," says Arcuri. 

Where "Just Transition" fits in 

This is precisely the gap that the concept of "Just Transition" is designed to address: the idea that moving away from fossil fuels must also reckon fairly with who bears the costs and who gets to benefit. Airey researches the evolving legal and governance framework around Just Transition. It already appears in Dutch municipal climate initiatives, in the EU's Just Transition Mechanism, and in a growing number of national climate laws. But unlike investor protections under ISDS, its legal dimensions are only beginning to be developed, and it is not yet backed by anything close to the same enforceable legal weight. 

For Airey, the significance of the Hague gathering lay not just in reflecting on these legal developments, but in showing how momentum is being put into action. The event brought together over fifty participants from academia, government, NGOs, and political life, creating, in her words, "a rare space to reflect, engage with, and strategically link these groundbreaking legal developments with the practical realities of political action." A contribution from UN Special Rapporteur Elisa Morgera reinforced a shared sense that the path toward a genuinely just, fossil-free transition is becoming clearer, and that the coalitions needed to advance it are growing stronger. 

With COP31 set for Antalya in November, the question raised in The Hague will only grow more pressing: can international law evolve quickly enough to make the energy transition not just rapid, but genuinely just?