UN Special Rapporteur on human rights and the environment, David Boyd, stated in a recent report how multinational companies are suing governments for fulfilling their commitments under the Paris Agreement on climate change. He highlighted that oil and gas corporations may well sue governments for some $340 billion in future ISDS cases, which is a major disincentive for ambitious climate action.
There has been a surge in fossil-fuel ISDS claims, at a time when humanity has reached the ‘now or never’ point for achieving the Paris Agreement objective of limiting global warming to 1.5°C. This goal requires reducing greenhouse gas emissions by 45% by 2030, and achieving net zero emissions by 2050, and is incompatible with new coal, oil or gas developments.
By slowing, weakening and in some cases reversing climate and environmental actions, ISDS claims have devastating consequences for a wide range of human rights, exacerbating the disproportionate harms suffered by vulnerable and marginalized populations. Yet international investment and trade agreements rarely incorporate effective provisions for environmental protection, while human rights obligations are ignored. Not one of the thousands of IIAs currently in force mentions the right to a clean, healthy and sustainable environment. ISDS arbitration tribunals routinely prioritize foreign investment and corporate interests above environmental and human rights considerations.
David Boyd UN Special Rapporteur on the Issue of Human Rights Obligations Relating to the Enjoyment of a Safe, Clean, Healthy and Sustainable Environment
David Boyd’s report shows how morally responsible arguments like “polluters pay” has been turned on its head, and polluting companies are suing governments for upholding fundamental rights or making policy changes to achieve their commitments in the Paris Agreement. One of the countries named in this report is Colombia.
In recent years Colombia has increasingly been sued by large MNCs for policies that protect the environment and biodiversity and address climate change, as well as uphold the fundamental rights of communities. Swiss commodities giant Glencore International has initiated three ICSID arbitration proceedings against Colombia, using the Colombia-Switzerland bilateral investment treaty (BIT). The most recent case arises out of the Colombian Constitutional Court’s suspension of the development of the northern portion of La Puente, at the Cerrejon open pit coal mine, in order to protect the fundamental rights of the Indigenous and Afro-Colombian communities living around the mine. The Court was concerned about the impact of the creek’s rerouting on the water supply for these communities. Wayuu Indigenous and Afro-Colombian Communities are calling on Glencore to withdraw this case. Read the Colombian NGO report on the situation.
David Boyd goes on to point out how the ISDS mechanism was initially established in the 1960s to protect investing companies from expropriation of their assets without compensation because national state judicial systems were weak. This is not the reason that foreign investors are suing states today. The majority of ISDS cases nowadays ‘challenge legitimate public policies enacted by democratic governments in States with independent judiciaries’. These claims result in “crippling damages awards, secrecy, lack of public participation, restrictions on States’ ability to regulate, the one-sided system, inconsistent tribunal decisions, the high costs of defending arbitration claims and conflicts of interest or the perceived bias of arbitrators in favour of investors” (see A/76/238).
The Parliamentary Assembly of the Council of Europe and the European Parliament have both warned about the serious consequences of ISDS for human rights, democracy, national sovereignty, climate policies and the just transition.
David Boyd
“Replacing domestic courts with arbitration tribunals to adjudicate disputes between foreign investors and States removes important safeguards against human rights violations, including transparency, public participation, equality and non-discrimination. The ISDS system also undermines democracy by subordinating important policy decisions to arbitration tribunals that are unaccountable, whose decisions are not subject to appeal and that have no duty to consider domestic law.” [paragraph 16].
The majority of ISDS claims are against countries in the Global South, however, more recently Northern States are being sued as well, and have started to take steps to protect themselves. Canada serves as an example of this. When Canada, the United States and Mexico renegotiated a trading deal between Canada and the USA in 2020, the ISDS mechanism was removed. Canada’s then Minister for Foreign Affairs, Chrystia
Freeland, said that ISDS had cost Canadian taxpayers more than 300 million dollars. According to Freeland, by removing ISDS, Canada had strengthened its right to regulate in the public interest, and to protect public health and the environment.
Wealthy States – like Canada, the United States and members of the European Union – are eliminating their exposure to ISDS claims but preserving the ability of their investors to continue extracting wealth and exploiting the global South through …ISDS claims and threats. [paragraph 20]
The Canadian Mining Giant Eco-Oro (formally Greystar Resources Ltd) sued the Colombian government for USD 696 million[i] because of the Colombian state’s refusal to allow mining in the Santurban paramos in Colombia. Eco-Oro has won this case. UNCTAD’s assessment is that the Eco Oro case, ‘signals that measures taken for the protection of the environment can be challenged and deemed in violation of International Investment Agreements’ and ‘sheds doubt on the effectiveness of explicit safeguards and exceptions’ included to ‘protect a state’s climate regulation’.[ii]
The International Arbitration regime heavily favours investors who, as large multinationals, have the skill and resources to outmanoeuvre states on the policy front, and frequently have their own legal teams. A further concern is that Investor-state arbitration disputes are carried out in secret by trade arbitrators (lawyers who both defend and prosecute cases as well as presiding over tribunals) and not independent judges.
Affected communities and human rights defenders have no access to the secret tribunals that hear these cases. Eco Oro sued the Colombian Government for their refusal to allow them to mine in the paramos, an important ecological area for water production and carbon sequestration. The claim is based on Colombia’s refusal to grant permits for the mine because of the significant environmental damage and jeopardy to water supplies that it could cause. Communities and civil society organizations opposing the project applied to submit an amicus brief, arguing that the actions taken by Colombia were justified by the State’s human rights obligations, including protection of the right to a healthy environment. The tribunal refused to admit the proposed submissions.
For those who want to take action to highlight shocking threat to the climate and to get decision makers to remove ISDS from UK Free Trade and Investment Treaties then ask your MP to sign EDM 136, to draw the government’s attention to the need to change its current practices. It is essential to terminate the Colombia-UK Bilateral Investment Agreement and to neutralise the sunset clause.
Notes:
[1] Parliamentary Assembly of the Council of Europe, resolution 2151 (2017), “Human rights compatibility of investor-State arbitration in international investment protection agreements”; and motion for a European Parliament resolution on the future of European Union international investment policy (2021/2176(INI)) cited in David Boyd’s Report
[i] The exact amount of the pay-out is yet to be decided and published italaw16212.pdf
[ii] Cited in Watson Farley and Solicitors, ISDS and Climate Change: What Happens Next? https://www.wfw.com/articles/isds-and-climate-change-what-happens-next/