Environment and development non-governmental organisations (NGOs) slowly began to grasp the purpose and significance of the International Court for the Settlement of Investment Disputes (ICSID) from around the turn of the century. In 2010, the effects of the findings and judgements of the World Bank court upon local communities and environments became particularly clear with the case of Pacific Rim (now Oceana Gold) against the state of El Salvador and specifically the department of Cabañas and the area around the town of San Isidro. In that particular case, several years later, the state of El Salvador won one of the few victories against a transnational mining corporation that ICSID has awarded, although the threat of land takeover and pollution from mining remains present in the country.

As time moved on, the significant threats to environments and communities of these unelected World Bank tribunals that in essence represent transnational corporations in their pursuit of profit became even clearer. They frequently make judgements that allow the corporations to pursue financial gain regardless of the communities and environments that they wish to exploit. It has been a classic case of poor people providing profits for rich transnational corporations, as a report by Martin Mowforth in the January 2012 Central America Report suggested with the headline: ‘The Perpetrator Who Sues The Victim: Pacific Rim Mining Company v El Salvador’. See all the articles under the section on El Salvador in Chapter 5 of this website: https://theviolenceofdevelopment.com/chapter-5-mining/  As the organisation Trade Justice has made clear:

Investor-State Dispute Settlement (ISDS) is a mechanism written into many older trade and investment agreements that allows individual corporations to challenge laws, regulations, permitting decisions and even court decisions that they view as a violation of their supposed trade agreement rights.

Very recently in interview with Ed Boles in Belize, ENCA member Liz Richmond recorded his words about their battle with Vulcan Materials:

… there is the 1.5 billion dollar lawsuit Vulcan won against Mexico because that Government refused to renew their mining permit due to the incredible environmental damage they have done just south of Playa del Carmen, and that is just one of three lawsuits they have filed against Mexico. The Belize Government is well aware of this and can look down the road, realizing that eventually Vulcan would operate very similarly in Belize, challenging our environmental laws and suing Belize if we took action against them, and even leveraging US Congress to take action against Belize, as they have done with Mexico. We cannot even afford to fight the case in international court, let alone pay billions should we come out on the bottom

And even more recently, Hélionor de Anzizu of the Centre for International Environmental Law (CIEL) produced a guide to ISDS cases. We are grateful to Hélionor and to CIEL for their permission to reproduce their guide to Investor-State Dispute Settlements below. (https://www.ciel.org )

By Hélionor de Anzizu (Centre for International Environmental Law (CIEL))

1^st April 2024

As the impacts of the climate crisis worsen and the world moves away from fossil fuels, oil and gas companies are turning to little-known trade and investment agreements to extort governments into maintaining their reliance on fossil fuels. These court proceedings, called Investor-State Dispute Settlement cases, or ISDS cases, are a mechanism through which fossil fuel companies can sue countries that take measures to phase out fossil fuels, claiming that such measures damage their ability to make profits.

The cases are undertaken in closed-door proceedings, and companies seek extreme settlement costs—often in the billions of dollars— even for projects that have yet to break ground. The prospect of an ISDS case has a chilling effect on government officials who may want to act in the public interest to phase out fossil fuels but are scared of expensive judgements.

That’s why CIEL seeks to end ISDS in trade and investment agreements. To accelerate the end of ISDS, CIEL just released a toolkit that helps government officials consider ways to exit investor agreements with fossil fuel companies without litigation or settlement payments. Here’s a quick overview on our new ISDS toolkit:

Q: What is ISDS?

• Fossil fuel companies invest in countries that promise to protect their foreign investments.
• When a State enacts measures that a company perceives will affect its profits, the company may use a mechanism to settle and negotiate the dispute, called ISDS.
• ISDS claims often involve huge costs and can award companies millions or billions of taxpayer dollars from the country.
• Most ISDS cases related to environmental, climate change, or human rights measures often fail to properly consider or uphold the responsibilities and obligations of the State involved

Q: How does ISDS work?

• The cases happen behind closed doors and most of the time do not allow the public to listen or participate.
• CIEL has long fought for the right of affected third parties to submit expert opinions, called amicus curiae submissions, or send additional documents to the court, but they are rarely accepted.

Q: Why are so many States willingly entering into investor agreements?

• For many States with lower GDPs, investor agreements are considered a way to attract capital investment in their economy, especially for countries with political instability.
• There has not been enough work to shift States away from making foreign investment deals, nor enough viable alternatives for countries to avoid making these deals.

Q: What is the ISDS toolkit?

• A recent IPCC report stated ISDS is a legal barrier to States pursuing real climate action.
• Some State leaders who want to take progressive climate action but are concerned about getting hit with an ISDS suit, have appealed to CIEL for guidance.
• CIEL’s toolkit is designed to help State officials and UN representatives navigate the different options that can eliminate ISDS risks or mitigate ISDS risks or respond to an ISDS if it arises.
• This toolkit is not intended to be comprehensive or exhaustive, but instead offers a sample of possible approaches States may pursue in the face of ISDS threats, though the unique circumstances and the timeline of ISDS-related risks will vary.
• What is clear and uniformly applicable, however, is that investment law must not impede urgently needed climate action.

Q: How does CIEL interact with the ISDS system?

• We educate State representatives, partner organisations, and frontline community members to use the toolkit to inform their advocacy for phasing out fossil fuels in their countries.
• Our ISDS toolkit is being rolled out to lawyers and environmental advocates to clarify the scale of the problem, provide solutions or alternatives to ISDS, and expose how ISDS is a barrier to real climate action.
• We have also worked with frontline communities and local partner organisations who have successfully stopped extractive projects, but then run into an ISDS case that undermines their progress. CIEL helps to change their challenges into legal terms that can be used in court.

Q: How does ISDS impact me?

• Many environmental activists encounter ISDS only after years of organising and finally achieving a monumental win. Or, they encounter it when pushing their country to stop a pipeline, offshore drilling, petrochemical plant, or extractive project, and the country fears ISDS to such a degree that it is unwilling to stop the project.
• This kit provides information you can share with your government officials to stop fossil fuel expansion and investments while avoiding or neutralizing ISDS risks.

ISDS should not slow down States’ rapid phase out of fossil fuels.

Our new toolkit sheds light on foreign fossil fuel investments and provides a clear path for States to take action and disentangle from these investment agreements. CIEL’s new toolkit gives hope for a greener future for countries whose economies are currently deeply entrenched with fossil fuels— it is possible for countries to get out of ISDS, phase out fossil fuels, and move towards renewable energy sources.

With hope for the future,

Hélionor De Anzizu
Staff Attorney
Environmental Health Program
Centre for International Environmental Law (CIEL)

Further Reading:
CIEL’s ISDS toolkit
Overview of ISDS