The largest winners from investor-state dispute settlement courts, which have given $114 billion in public funds, are fossil fuel companies.
The most thorough analysis to date indicates that private investors have received more than $100 billion in public funds from investor-state dispute settlement (ISDS) tribunals.
The contentious arbitration process, which permits businesses to sue governments for damages over choices they claim have an impact on their bottom lines, is mostly conducted behind closed doors, with some rulings remaining undisclosed. However, a worldwide ISDS tracker that goes live today claims that $114 billion has already been paid to investors from public coffers; this amounts to roughly the amount that wealthy countries will provide to climate relief in 2022.
The Trade Justice Movement, which co-created the tracker, is led by Tom Wills, who stated: “The data confirms what we’ve been saying for years: ISDS is the hidden weapon that fossil fuel companies use to oppose climate regulations. Governments are also intimidated by corporate courts into resisting citizen pressure, whether local or national, to take action on climate change. There must be an end to this. According to the data, reform is desperately needed.
The EU’s mass withdrawal from the Energy Charter Treaty last week, which was one of the main sources of investor-state disputes, has left the ISDS system in ruins.
However, the majority of contemporary international investment agreements still include the mechanism. It grants foreign investors the ability to bring billion-dollar lawsuits against governments when public policies like green legislation negatively impact their projected earnings.
According to a UN report from last October, ISDS tribunals, in contrast to national courts, provide investors the ability to appoint panels that would hear their case, posing “obvious risks of bias, conflicts of interest, potential misconduct and other abuses of power.”
The research concluded that even in cases where climate action had been “necessary and foreseeable for decades,” the ISDS system has prohibited states from acting.
A searchable archive of all 1,362 filed ISDS cases is available on the tracker. According to the data, investors have attempted to obtain $857 billion from national governments thus far, with 129 claims totaling $1 billion or more.
Among the most striking examples are:
- TC Energy filed a $15 billion lawsuit seeking damages from the US government for blocking the Keystone XL project, which would have delivered 830,000 barrels of extremely polluting tar sands oil daily to the US coast. Joe Biden revoked the permit on his first day in office following an extensive campaign by farmers, climate activists, and Indigenous Americans. The pipeline became a key cultural war issue after being supported by the former president, Donald Trump.
- Following the Quebec government’s cancellation of a natural gas liquefaction plant on the St Lawrence River, Ruby River Capital filed a claim for “no less than $20 billion.” According to an environmental impact study, the facility would harm Indigenous Canadian communities, raise greenhouse gas emissions, and wipe off biodiversity. The largest claim ever made under the North American Free Trade Agreement (Nafta) was made by RRC.
- Zeph Investment’s $200 billion lawsuit against Australia over a massive planned mine in Western Australia, which Zeph Investment alleges the Australian government “effectively destroyed,” in violation of the Asean free trade agreement, is currently the most valuable ISDS claim under consideration.
- After the Republic of the Congo withdrew the iron ore mining licenses of three Australian-owned companies and gave them to a small Chinese investment group, Avima Iron Ore is suing the country for $27 billion. The amount is nearly two times the GDP of the nation for the previous year.
Many people believe that the current ISDS system emerged as a result of attempts to stop former colonies in the global south from nationalizing or seizing industrial companies after they gained independence. Even the US Trade Representative’s office praises ISDS for being a nonviolent substitute for the gunboat diplomacy of the 1800s. However, it has mostly developed to stifle national efforts to impose social and environmental regulations that can have a negative impact on the aspirations of investors.
“The injustice is glaringly obvious: countries in the global south are the main victims of ISDS, while corporations from Europe and North America benefit,” stated Fabian Flues of the PowerShift NGO, which co-compiled the report. It moves public funds into the pockets of a select group of firms and their investors. This needs to end. It is imperative that all nations withdraw from the ISDS treaties in order to create a just and sustainable future.
For comment, The Guardian contacted Business Europe and the US Chamber of Commerce.
