{"id":60130216,"date":"2026-04-24T17:15:12","date_gmt":"2026-04-24T16:15:12","guid":{"rendered":"https:\/\/dialogue.earth\/?p=60130216"},"modified":"2026-04-24T17:15:22","modified_gmt":"2026-04-24T16:15:22","slug":"how-investor-state-arbitration-throttles-environmental-action","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/how-investor-state-arbitration-throttles-environmental-action\/","title":{"rendered":"How investor-state arbitration throttles environmental action"},"content":{"rendered":"\n<p>When plans were announced for an open-pit copper mine in the cloud forests of Ecuador in 2004, they were vigorously opposed by residents. The project risked damaging forests, water sources and the area\u2019s rich biodiversity, they said.<\/p>\n\n\n\n<p>In a rare victory for community action, the Ecuadorean government pulled support for the scheme. But that was not where the story ended. The miners behind the project, Copper Mesa, decided to take the Ecuadorean government to an investor arbitration tribunal. The Canadian company was ultimately <a href=\"https:\/\/isds-americalatina.org\/emblematic-cases\/copper-mesa-vs-ecuador\/\">awarded<\/a> a payout of USD 24 million.<\/p>\n\n\n\n<p>Investor-state dispute settlement (ISDS) is a process baked into thousands of investment treaties and contracts. It is supposed to give foreign investors certainty by giving them the right to sue governments over damage to their profits \u2013 and the reassurance that their assets will not be seized by a future government in the host country.<\/p>\n\n\n\n<p>ISDS is heavily criticised by environmentalists and academics. They claim it has a \u201cchilling effect\u201d on environmental regulations, and gives foreign investors preferential treatment. The high cost of claims also strains public budgets.<\/p>\n\n\n\n<p>In March, 220 economists and legal experts <a href=\"https:\/\/www.bu.edu\/gdp\/2026\/03\/19\/isds-letter\/#_ftn3\">wrote<\/a> to Colombia\u2019s president, Gustavo Petro, ahead of his country hosting the First Conference on Transitioning Away from Fossil Fuels, which <a href=\"https:\/\/transitionawayconference.com\/\">commences today<\/a> in Santa Marta. This new international conference is dedicated to reducing fossil fuel reliance. The letter urges Petro to withdraw Colombia from ISDS, arguing that the system impinges on states\u2019 rights to \u201cregulate freely in the public interest, including in the context of climate action\u201d.<\/p>\n\n\n\n<p>Colombia has 129 oil and gas projects covered by ISDS which, the letter explains, exposes it to claims in the \u201cbillions of dollars\u201d. In a <a href=\"https:\/\/x.com\/petrogustavo\/status\/2036159615331635578\">post<\/a> on X in late March, Petro suggested he would \u201caccept the invitation\u201d.<\/p>\n\n\n\n<p>Exactly what Petro means by that is likely to be hotly debated over the next six days at Transition Away.<\/p>\n\n\n\n<div class=\"wp-block-cd-article-image aligncenter block--article-image block--article-image--article\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--article-image__column\"><div class=\"hide-expand block--article-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/08\/20240406_aerial_flares-near-Enokanki-parish_Orellana-Ecuador_Patricio-Teran_Dialogue-Earth.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/08\/20240406_aerial_flares-near-Enokanki-parish_Orellana-Ecuador_Patricio-Teran_Dialogue-Earth-768x512.jpg 768w, https:\/\/dialogue.earth\/content\/uploads\/2024\/08\/20240406_aerial_flares-near-Enokanki-parish_Orellana-Ecuador_Patricio-Teran_Dialogue-Earth-1024x682.jpg 1024w, https:\/\/dialogue.earth\/content\/uploads\/2024\/08\/20240406_aerial_flares-near-Enokanki-parish_Orellana-Ecuador_Patricio-Teran_Dialogue-Earth.jpg 2560w\" data-sizes=\"(max-width: 600px) 768px, (max-width: 1024px) 1024px, 2560px\" alt=\"Aerial view of a burning oil well in the rainforest\"\/><\/div><div class=\"block--article-image__content\"><div itemprop=\"caption\" class=\"block--article-image__caption\">Gas flares near a residential area in Orellana province, eastern Ecuador. Experts say a growing number of investor-state dispute settlement claims from mining, oil and gas interests are challenging environmental conservation policies across Latin America (Image: Patricio Ter\u00e1n \/ Dialogue Earth)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/08\/20240406_aerial_flares-near-Enokanki-parish_Orellana-Ecuador_Patricio-Teran_Dialogue-Earth.jpg\"\/><meta itemprop=\"contentSize\" content=\"2 MB\"\/><meta itemprop=\"height\" content=\"1705\"\/><meta itemprop=\"width\" content=\"2560\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-isds\">What is ISDS?<\/h2>\n\n\n\n<p>Agreements containing ISDS proliferated throughout the 1990s. Dialogue Earth consulted Luciana Ghiotto of the Transnational Institute (TNI), a research and advocacy centre based in the Netherlands. She says wealthier nations promoted these agreements as a way of attracting badly needed investment.<\/p>\n\n\n\n<p>ISDS is thought to be written into more than 3,000 bilateral investment and multilateral trade treaties, according to <a href=\"https:\/\/www.nortonrosefulbright.com\/en-gb\/knowledge\/publications\/8014c6b7\/frequently-asked-questions-about-investor-state-dispute-settlement\">estimates<\/a>, as well as private contracts. In rare cases, it is written into domestic law in the receiving countries.<\/p>\n\n\n\n<p>Advocates argue ISDS gives foreign investors certainty and makes them more likely to invest.<\/p>\n\n\n\n<p>However, studies have cast doubt on these claims. A 2020 <a href=\"https:\/\/onlinelibrary.wiley.com\/doi\/full\/10.1111\/joes.12392\">article<\/a> in the Journal of Economic Surveys claimed the impact of such agreements was \u201cso small as to be considered zero\u201d. It ceded, however, that contemporary research methods may have been insufficiently precise.<\/p>\n\n\n\n<p>Ladan Mehranvar, a legal researcher at Columbia University in the US, says ISDS puts foreign companies in a privileged position: \u201cThese protections go well beyond what\u2019s afforded to similar domestic investors.\u201d<\/p>\n\n\n\n<p>Claims can be brought in a number of international tribunals. The most commonly used is the International Centre for Settlement of Investment Disputes (<a href=\"https:\/\/www.worldbank.org\/en\/about\/annual-report\/icsid\">ICSID<\/a>), which sits within the World Bank.<\/p>\n\n\n\n<p>Rachel Thrasher, a global trade researcher at Boston University in the US, says this process is a \u201cunique international instrument\u201d. She explains: \u201cThis is a situation where countries have granted consent to foreign investors to sue them [outside of their own courts].\u201d<\/p>\n\n\n\n<p>Most cases have generally related to nationalisations. But investors are proving increasingly willing to file claims related to environmental protections that affect their investments.<\/p>\n\n\n\n<p>In the past 30 years, at least 419 known cases have been filed against Latin American and Caribbean countries, according to a TNI <a href=\"https:\/\/www.tni.org\/en\/publication\/isds-in-numbers-2\">report<\/a> published in February. Awards to investors from these tribunals totalled USD 36.6 billion.<\/p>\n\n\n\n<p>Roughly a quarter of these cases relate to the environment. But this proportion has more than doubled since 2014.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-isds-throttles-environmental-protections\">How ISDS throttles environmental protections<\/h2>\n\n\n\n<p>Latin American countries have faced a \u201cgrowing\u201d number of claims from mining, oil and gas investors challenging \u201cenvironmental conservation policies [and] regulations protecting communities\u2019 rights\u201d, according to the TNI report.<\/p>\n\n\n\n<p>In 2023, the UN environmental human rights rapporteur David Boyd <a href=\"https:\/\/www.ohchr.org\/en\/documents\/thematic-reports\/a78168-paying-polluters-catastrophic-consequences-investor-state-dispute\">found that<\/a> \u201csecretive\u201d ISDS mechanisms were a \u201cmajor obstacle\u201d in addressing environmental crises. His report confirmed that foreign investors use the process to \u201cseek exorbitant compensation from states that strengthen environmental protection\u201d. The fossil fuel and mining industries had been awarded more than USD 100 billion, making it a system for \u201cpaying polluters\u201d.<\/p>\n\n\n\n<p>Latin American countries remain exposed. A November 2025 <a href=\"https:\/\/www.bu.edu\/gdp\/files\/2025\/11\/GEGI-PB-032-FIN.pdf\">policy brief<\/a> from Boston University found 218 oil and gas projects in Amazonian countries covered by ISDS provisions. \u201cPolicies that limit oil and gas extraction could result in ISDS claims from fossil fuel companies whose profits depend on related deforestation,\u201d the brief reads.<\/p>\n\n\n\n<p>\u201cThere is a chilling effect,\u201d says Ghiotto. \u201cThe investor is free to do whatever he wants and whenever the state wants to make a small regulation to prevent, for example, mining in a wetland, these corporations start threatening states with a claim.\u201d<\/p>\n\n\n\n<p>Crucially, these claims do not have to be filed to prevent climate action. In 2017, the social scientist Kyla Tienhaara <a href=\"https:\/\/www.cambridge.org\/core\/journals\/transnational-environmental-law\/article\/regulatory-chill-in-a-warming-world-the-threat-to-climate-policy-posed-by-investorstate-dispute-settlement\/C1103F92D8A9386D33679A649FEF7C84\">warned<\/a> that oil and gas companies could use the system to delay public policy on climate change, a tactic previously used by the tobacco industry: \u201cFossil fuel corporations do not have to win any ISDS cases for this strategy to be effective; they only have to be willing to launch them.\u201d<\/p>\n\n\n\n<p>Colombia has fallen victim to this regulatory chill in public health policy. In 2016, the government was <a href=\"https:\/\/www.tni.org\/files\/novartis-vs-colombia.pdf\">challenged<\/a> by a drug company when it attempted to remove its production monopoly on blood cancer medicine to lower the price. The policy was scrapped.<\/p>\n\n\n\n<p>The country also faced a tribunal over a decision by its constitutional court to ban mining in some of its mountainous ecosystems, citing environmental risks. This blocked a planned gold mining project by Canadian company Eco Oro, which <a href=\"https:\/\/isds-americalatina.org\/emblematic-cases\/eco-oro-vs-colombia\/\">sued<\/a> for USD 696 million in compensation. In an unusual judgement, the tribunal ruled that the court\u2019s decision was legitimate, but also that the company had been treated unfairly. It ultimately awarded symbolic compensation of USD 0 (zero), but Colombia was still left with an estimated USD 6 million in tribunal costs.<\/p>\n\n\n\n<p>Mehranvar points out that tribunal decisions tend to be skewed in favour of the Global North, with most cases being filed against Global South countries: \u201cIt\u2019s very one-sided.\u201d Thrasher adds that, even when Global North countries do face claims, they may be better able to defend themselves thanks to their greater resources.<\/p>\n\n\n\n<div class=\"wp-block-cd-article-image aligncenter block--article-image block--article-image--article\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--article-image__column\"><div class=\"hide-expand block--article-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2023\/08\/20230811_squirrel_monkey_Yasuni_park_Ecuador_Flor-Ruiz_DialogoChino.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2023\/08\/20230811_squirrel_monkey_Yasuni_park_Ecuador_Flor-Ruiz_DialogoChino-768x511.jpg 768w, https:\/\/dialogue.earth\/content\/uploads\/2023\/08\/20230811_squirrel_monkey_Yasuni_park_Ecuador_Flor-Ruiz_DialogoChino-1024x681.jpg 1024w, https:\/\/dialogue.earth\/content\/uploads\/2023\/08\/20230811_squirrel_monkey_Yasuni_park_Ecuador_Flor-Ruiz_DialogoChino.jpg 2560w\" data-sizes=\"(max-width: 600px) 768px, (max-width: 1024px) 1024px, 2560px\" alt=\"A squirrel monkey sits on a tree branch\"\/><\/div><div class=\"block--article-image__content\"><div itemprop=\"caption\" class=\"block--article-image__caption\">A squirrel monkey in Ecuador\u2019s Yasun\u00ed Biosphere Reserve, one of the world\u2019s most biodiverse places. The country withdrew from the International Centre for Settlement of Investment Disputes in 2010 and, by 2017, had terminated its bilateral investment treaties (Image: Flor Ruiz \/ Dialogue Earth)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2023\/08\/20230811_squirrel_monkey_Yasuni_park_Ecuador_Flor-Ruiz_DialogoChino.jpg\"\/><meta itemprop=\"contentSize\" content=\"2 MB\"\/><meta itemprop=\"height\" content=\"1703\"\/><meta itemprop=\"width\" content=\"2560\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-could-colombia-leave\">Could Colombia leave?<\/h2>\n\n\n\n<p>During his administration, Petro has halted new oil and gas licences and, via its hosting of the Transitioning Away conference, his government is placing itself at the forefront of fossil fuel phaseout. However, this could expose it \u2013 and other similar countries \u2013 to ISDS claims. The Netherlands, for example, is facing a <a href=\"https:\/\/jusmundi.com\/en\/document\/decision\/en-exxonmobil-petroleum-chemical-bv-v-kingdom-of-the-netherlands-procedural-order-no-5-concerning-the-claimant-s-further-request-for-provisional-measures-wednesday-24th-december-2025\">claim<\/a> from ExxonMobil for its decision to close the Groningen gas field.<\/p>\n\n\n\n<p>The 220 economists and legal experts who wrote to Petro think leaving the ISDS system is the solution. But what could this look like?<\/p>\n\n\n\n<p>The country could attempt to renegotiate its multi- and bilateral trade treaties to remove ISDS. However, it could also choose to leave them unilaterally. Another solution could be to withdraw from the ICSID.<\/p>\n\n\n\n<p>Ecuador withdrew from ICSID in 2010 and by 2017 had terminated its bilateral investment treaties. In addition, its constitution was amended to <a href=\"https:\/\/www.tni.org\/en\/article\/the-referendum-in-ecuador\">prevent<\/a> the signing of future treaties containing ISDS clauses. Bolivia also withdrew after facing a claim following the <a href=\"https:\/\/climate-diplomacy.org\/case-studies\/water-privatisation-cochabamba-bolivia\">renationalisation<\/a> of Cochabamba\u2019s water supply in 2000. Privatisation had quickly increased prices by 50%, leading to an uprising in the city dubbed the \u201cwar of water\u201d.<\/p>\n\n\n\n<p>Ghiotto says the idea that withdrawing from ISDS will reduce investment is a \u201cmyth\u201d. Brazil has entirely avoided treaties containing ISDS clauses and is regularly the first or second destination for foreign investment in Latin America. Foreign companies will invest where the resources are, she explains: \u201cYou cannot extract lithium or gold in the outskirts of Paris or in London.\u201d &nbsp;<\/p>\n\n\n\n<p>Since terminating its agreements in 2017, Ecuador has still been able to attract significant foreign investment \u2013 for example, a new <a href=\"https:\/\/www.reuters.com\/latam\/negocio\/IK73TYIN2NPQTG7IY25YRXYPDY-2025-02-02\/\">trade agreement<\/a> with Canada that excludes traditional ISDS.<\/p>\n\n\n\n<p>Dialogue Earth spoke to Federico Gay, an analyst at the energy transition supply chains specialist Benchmark Minerals. Gay says multiple factors play into a company\u2019s decision to invest overseas, or a government\u2019s decision to accept investment. Companies would be far more concerned about the prospect of political instability than whether they would have adequate investor protection, he explains.<\/p>\n\n\n\n<p>Even once a country has decided to leave, it remains bound by termination clauses written into agreements that can effectively keep the agreement in force for decades. \u201cThis is a way of putting the states in handcuffs,\u201d Ghiotto says. \u201cIt\u2019s very difficult [to leave], but you have to try, otherwise there is no way that you will be able to regulate. The system is made for you not to regulate.\u201d<\/p>\n\n\n\n<p>As the Santa Marta conference begins, Colombia\u2019s foreign investors will be cautiously waiting to see if Petro follows through on his word.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Colombia could abandon investor-state dispute settlement, a system that its critics say gives foreign investors preferential treatment<\/p>\n","protected":false},"author":50000868,"featured_media":60130194,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758],"tags":[523,566,600],"hashtags":[],"country":[50000025],"class_list":["post-60130216","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-conservation","tag-mining","tag-trade","country-colombia"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - 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