A System of Secret Arbitration Tribunals Is Undercutting Climate Action Worldwide

Investor-State Dispute Settlement Mechanisms Delay Progress on Climate Change and Environmental Crises, Says UN Report

A new report by United Nations expert David R. Boyd highlights the detrimental impact of investor-state dispute settlement (ISDS) mechanisms on sustainable development goals (SDGs). These mechanisms, found in thousands of investment treaties, allow companies to sue national governments if they believe regulations or unfair competition hinder their investments. Boyd argues that ISDS tribunals, which operate in secrecy, have led to exorbitant damages awards against states, permits for environmentally destructive activities, and the rollback of vital rules addressing climate change, biodiversity loss, and pollution.

ISDS Cases and Environmental Protections

Boyd’s report reveals that the number of known ISDS cases targeting environmental protections has significantly increased in recent years. Nations have been ordered to pay over $100 billion in damages to coal, oil, gas, electricity, and mining firms. Furthermore, governments striving to fulfill their Paris Agreement commitments may face an additional $340 billion in future cases, discouraging ambitious climate action. The mere threat of these cases has a chilling effect on public environmental policy.

Violation of Human Rights

ISDS mechanisms not only impede environmental progress but also violate fundamental human rights. Boyd emphasizes that the right to life, health, food, water, cultural rights, and a clean and sustainable environment are being undermined by the ISDS system. He argues that unless the ISDS system is eliminated, these violations will persist, and the rule of law will continue to be undermined.

The Need for Reform

Boyd calls on states to reform or withdraw from investment treaties containing ISDS mechanisms. He recommends negotiating the removal of ISDS from existing agreements and terminating treaties that include them. Boyd also urges nations to negotiate new agreements that prioritize human rights and environmental protection.

Implications for the Energy Charter Treaty

The Energy Charter Treaty, which has gained attention for hindering climate action, has been used by fossil fuel companies to seek compensation for financial losses resulting from environmental and climate policies. Italy, for example, was ordered to pay over $200 million to a UK oil company as compensation for an offshore oil drilling ban. The UK and the European Union are considering reviewing their membership in the treaty due to its potential undermining of climate targets.

Concerns and Recommendations

Boyd’s report echoes previous concerns raised by the U.N. Intergovernmental Panel on Climate Change (IPCC) and the UN Environment Program (UNEP). The IPCC highlighted how trade and investment treaties may limit countries’ ability to reduce emissions, while the UNEP and the Sabin Center for Climate Change Law at Columbia University identified ISDS cases as part of an anti-climate legal backlash. Boyd recommends that governments withdraw consent to arbitration under existing investment treaties, negotiate the removal of ISDS mechanisms, and negotiate new agreements that protect human rights and the environment.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 13: Climate Action
• SDG 15: Life on Land
• SDG 16: Peace, Justice, and Strong Institutions

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
• SDG 15.9: By 2020, integrate ecosystem and biodiversity values into national and local planning, development processes, poverty reduction strategies, and accounts.
• SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Number of known ISDS cases targeting environmental protections.
• Total damages awarded to coal, oil, gas, electricity, and mining firms through ISDS cases.
• Potential damages that may be awarded to oil and gas corporations for non-compliance with Paris Agreement commitments.
• Existence of public pressure to act on climate change as evidence of politically motivated government decisions.

Table: SDGs, Targets, and Indicators

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Source: desmog.com

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