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investor state dispute settlements
The UN Summit of the Future’s Commitment to Corporate Power Undermines Its Goals
If world leaders who are coming to the U.N. Summit on September 22 and 23 are serious about protecting the future of humanity and the planet, they should dismantle an anti-democratic investment system.
Sep 17, 2024
The United Nations is hosting world leaders on September 22 and 23 for a “Summit of the Future.” Unfortunately, the draft action plan for the summit, while full of lofty language and some good intentions, does not challenge the neoliberal model or corporate control of the global economy.
On the contrary, it proposes, for example, to “facilitate access of developing countries to the WTO and promote trade and investment liberalization.”
It’s astounding that this plan, which is supposed to serve as the basis for an inter-governmental agreement, is so stuck in the past. For decades now, social movements and elected officials in many countries have become increasingly opposed to trade and investment rules that grant enormous privileges and power to transnational corporations.
The increase in demand for minerals for euphemistically named “green” energy transitions means that governments will be at greater risk of facing multi-million dollar lawsuits, as these processes are generating social reactions worldwide.
In many ways, these old rules directly contradict the U.N. summit’s overall goal of creating “a world that is safe, sustainable, peaceful, inclusive, just, equal, orderly, and resilient.”
They also make a mockery of the summit’s stated commitment to the U.N. Charter principle of “full respect for the sovereign equality of all Member States” and the principle of “equal rights and self-determination of peoples.”
Just take a look at how the natural resource extractive industries have used the existing investor-state dispute settlement (ISDS) system to undercut national sovereignty and sustainability and to foment conflict. The mining sector, in particular, has used this system, enforced through almost 3,000 treaties, to sue governments in supranational tribunals, bypassing national legal systems.
The vast majority of ISDS claims are directed against countries in the so-called “Global South,” and most suits are targeted at Latin American countries. ISDS allow corporations to suppress the opposition of local and Indigenous communities fighting for their territorial and environmental rights. When governments respond in favor of communities resisting mining projects, companies often use these lawsuits to blackmail governments into backing down and granting permits for environmentally destructive projects or pay “compensation” for the loss of expected corporate profits.
Investment treaties even include “full protection and security” clauses that give companies the right to demand that governments repress communities that oppose their mining projects. In Guatemala, for instance, the Nevada-based mining company KCA claims that the government failed to provide access to a mining site blocked by Indigenous protesters, and is suing the country for more than $400 million.
The increase in demand for minerals for euphemistically named “green” energy transitions means that governments will be at greater risk of facing multi-million dollar lawsuits, as these processes are generating social reactions worldwide. The Transnational Institute, the Institute for Policy Studies, and other organizations recently published extensive information on mining (and other) company lawsuits against governments in an “ISDS-Tracker” site.
Panama is facing a particularly scandalous example of these ISDS lawsuits. The people of this country have risen up against the Canadian mining company First Quantum and in November 2023 succeeded in having Panama’s Supreme Court declare the renewal of the company’s copper mine license unconstitutional. This led the Panamanian National Assembly to approve a mining moratorium law.
According to reports, First Quantum has sued Panama for the unpayable sum of $30 billion at the International Chamber of Commerce in Paris, and has threatened another $20 billion arbitration under the Canada-Panama Free Trade Agreement.
Other transnational mining companies affected by the cancellation of licenses have followed First Quantum’s example and, in total, Panama faces ISDS claims for at least $57 billion, equivalent to more than half of its GDP.
As we demonstrate in our recent report “ISDS: A portrait of transnational power in Mexico, the investment protection regime, and its consequences,” Mexico is facing lawsuits totaling at least $13 billion, with more than half of them related to mining. This figure is partial, as it corresponds only to claims at the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), which publishes information about them. On the other hand, the International Chamber of Commerce, where Panama has been sued, and other supranational tribunals do not publish information on cases.
The ISDS system has been dismantled among some rich countries. For instance, the United States and Canada eliminated it among themselves in the United States-Mexico-Canada Agreement. The European Union eliminated it among its member states and is exiting the Energy Charter Treaty, which also allowed these investor-state suits.
If world leaders who are coming to the U.N. Summit on September 22 and 23 are serious about protecting the future of humanity and the planet, they should dismantle this anti-democratic investment system (ISDS) for all countries.
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State Lawmakers Urge US Exit From Toxic ISDS Mechanisms in Trade Deals
"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create," said one lawmaker from Maine.
Aug 06, 2024
More than 300 state lawmakers signed a letter Monday calling on U.S. President Joe Biden to "eliminate the threat of Investor-State Dispute Settlement from all U.S. trade and investment agreements," joining hundreds of civil society groups and dozens of members of Congress in speaking out against rules that allow foreign corporations to challenge state laws.
The legislators—who include Democrats, Republicans, and Independents—expressed support for the official position of the National Conference of State Legislatures (NCSL) regarding ISDS, as the conference convened its annual summit in Louisville, Kentucky.
The NCSL opposes trade deals "with investment chapters that provide greater substantive or procedural rights to foreign companies than U.S. companies enjoy under the U.S. Constitution."
The Biden administration has agreed with the NCSL's call to exclude ISDS from any new trade agreements, but the U.S. is currently a party to more than 50 trade and investment deals that contain the rules.
"It's long overdue that we change course. Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start.
ISDS rules empower corporations to sue governments if they claim their profit margins are harmed by public programs, such as public health regulations, environmental rules, food safety guidelines, or climate laws aimed at reducing fossil fuel emissions.
"The outcomes of these cases, which can result in billions of U.S. tax dollars paid to foreign corporations in compensation, are
determined in unaccountable tribunals presided over by unelected corporate lawyers whose rulings are not subject to appeal," reads the Monday letter from state lawmakers, including North Carolina state Rep. Pricey Harrison (D-61), New York state Sen. Liz Krueger (D-28), and Florida Rep. Anna Eskamani (D-42).
According to the letter, "even cases that get dismissed can result in countries paying millions in tribunal costs."
Harrison said in a statement that "the era of corporate-dominated trade policy" has contributed to a loss of 40% of North Carolina's manufacturing jobs.
"It's long overdue that we change course," said Harrison. "Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start. These extreme corporate rights undermine democracy and critical public interest protections here at home and around the globe. I'm glad to see so many colleagues from across the political spectrum joining me in this effort."
Last November, 200 civil society groups demanded the elimination of ISDS within APEP, and three dozen members of Congress wrote to U.S. Trade Representative Katherine Tai and Secretary of State Antony Blinken last May saying the U.S. should end the system's use in its trade agreements.
Allowing corporations to sue over laws that cut into their profits, wrote the lawmakers on Monday, "threatens the policy space we need to maintain high-level public health standards, create clean energy jobs, protect the digital privacy and data-security of those we represent, and much more."
Maine state Sen. Craig Hickman (D-14) expressed concern about ISDS both as a lawmaker and "an organic farmer committed to curtailing the severe impacts of climate change and strengthening rural economies."
"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create,"
said Hickman. "I urge the administration to eliminate this antiquated mechanism that stands in the way of sustainable food systems and the clean energy economy we need to build for our children and grandchildren."
Note: This article has been edited to correct a reference to U.S. trade deals containing ISDS and the Americas Partnership for Economic Prosperity.
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'Time Is Up': Democrats Target Trade Regime That Blocks Climate Progress
"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system," said Sen. Elizabeth Warren. "It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all."
May 29, 2024
Prominent Democrats on Wednesday called for ending corporate-backed arbitration provisions in trade agreements as the Sierra Club issued a report showing that fossil fuel companies use the provisions to block climate action.
The report calls for the U.S. government to not only stop signing trade agreements with Investor-State Dispute Settlement (ISDS) provisions, as President Joe Biden has already done since taking office, but also end or modify existing agreements that have them. ISDS provisions allow companies to protect their investments in a foreign country and seek compensation from an ad hoc arbitration tribunal, rather than the country's courts, if they are threatened by legislation, regulation, or the cancellation of a project.
"While it has correctly rejected ISDS for future trade agreements, the Biden administration has made no effort to remove these egregious provisions from existing agreements," Rep. Lloyd Doggett (D-Texas) said in a Sierra Club statement. "Powerful multinational corporations continue abusing ISDS to intimidate countries from strengthening environmental and human rights protections."
Many ISDS cases pit powerful corporations against low- and middle-income countries, but wealthy nations are also liable to be sued. TC Energy, a multinational fossil fuel company, sued the US for $15 billion following the discontinuation of the Keystone XL pipeline project, and Canada faces a $20 billion suit over a canceled liquefied natural gas project in Québec. Overall, nearly 20% of the world's 1,206 known ISDS arbitration cases have been brought by fossil fuel companies, according to the Sierra Club report.
The investor-state dispute settlement (ISDS) regime gives polluters license to sue governments for their public interest policies, including those that would reduce the production of fossil fuels.
Now is the time to end ISDS for good.
— Iliana Paul (@iliana_m_paul) May 29, 2024
"ISDS mechanisms corruptly advance the power of big corporate polluters over the interests of the public and the planet. This new report from the Sierra Club makes it clear that ISDS's time is up," Sen. Sheldon Whitehouse (D-R.I.) said in the group's statement. He, too, is pushing the Biden administration to remove ISDS provisions from existing agreements.
While the Sierra Club report focuses on ISDS's climate impacts, the authors argue that the effects of the provisions, which give corporations extraordinary power, are much broader. "The dangers of ISDS are stark not just for climate change, but for a broad swath of public interest policies including ones related to public health, labor protections and workers' rights, green jobs policies, and more," they wrote.
Democrats voiced agreement about the broad consequences of the provisions, which have been the subject of a growing chorus of criticism by politicians and public interests groups.
"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system that multinational companies use to bypass domestic courts and challenge protections for the environment, workers, and consumers around the world. It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all," said Sen. Elizabeth Warren (D-Mass.) in the Sierra Club statement.
In November, Sierra Club, Public Citizen, the AFL-CIO and more than 200 other organizations called on the Biden administration to dismantle ISDS provisions between the U.S. and countries in the Americas, saying that the president should "free public interest policies from the shadow of ISDS."
That followed an April letter to Biden in which more than 300 law and economics professors, including Nobel laureate and Columbia University professor Joseph Stiglitz, called for an end to ISDS in existing trade agreements, arguing that there's a "bipartisan consensus" for such reform.
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