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ISDS Lawsuits Brake Climate Change

from the Nov. 17, 2021 Bulletin

unions economy & economic reform environmental issues

Manuel Pérez-Rocha, an Institute for Policy Studies associate fellow in Washington and a Transnational Institute associate in Amsterdam, has been a leader in efforts to promote just and sustainable approaches to trade and investment agreements. A dual Mexican and US citizen, Pérez-Rocha has co-edited the comprehensive 2019 analysis, Beyond NAFTA 2.0, and, most recently, Transnational Corporations and Free Trade in México. He writes regularly for the Mexican daily La Jornada.


Under free trade agreements like NAFTA, foreign companies have decimated whole sectors of local economies, like corn production in México. But these pacts, you note, can also decimate national treasuries.

Manuel Perez-Rocha: Investor-State Dispute Settlement provisions let corporations sue countries for actions that allegedly reduce the value of their corporate investments. These ISDS lawsuits bypass national public courts and go directly to private supranational tribunals. I don’t say “international” here because the ISDS process doesn’t have nations interacting with each other. The most commonly used tribunal, hosted by the World Bank, has three judges picked from a roster of corporate lawyers, most from the US or Europe.


How does the Investor-State Dispute Settlement process impact climate change?


The climate may be warming, but the ISDS is putting a “chilling” effect on governments that want to enact policies to slow climate change. In many instances, nations have shelved these policies out of the fear that corporate lawsuits would tear big holes in their national budgets. Oil, gas, and mining companies have over 70 cases pending against nations trying to protect their environments.


US corporations do a hefty share of the suing and have not lost any cases, and the US government, for its part, hasn’t been immune from suits. The best example may be the Keystone Pipeline. President Obama halted the pipeline, after a huge public outcry against it, but then Donald Trump reinstated it. President Biden has since revoked the pipeline permit, but the Canadian company that held the permit is suing the US for $15 billion of our tax dollars. So we have a situation where first we organize to stop a corporate project dangerous to our health, then we may have to pay the corporation that gets stopped.


What industries use ISDS the most?

The extractive industries that do so much environmental damage — oil, gas, and mining — account for 30 percent of the cases registered. This may be an undercount, since many suits go under the radar.

Graph: ICSID World Bank Group, Damon Vis Dunbar, 2020

Why have less developed countries like México agreed to trade agreement terms that prioritize foreign corporate interests over the well-being of their people?


The main reason: corruption. We see a revolving door between “free trade” negotiating teams and corporate boards. Many government leaders — former Mexican presidents like Salinas, Zedillo, Fox, Calderón, and Peña-Nieto — haven’t been looking out for their country’s welfare. They signed the trade agreements to benefit themselves.


AMLO signed the USMCA, the successor agreement to NAFTA that preserves ISDS for oil and gas companies, but at the same time re-nationalizes the oil sector. What’s up?


AMLO isn’t looking to join a corporate board, but he made a big mistake letting ISDS stay in the USMCA. Lots of confusing contradictions here: AMLO talks tough on energy sovereignty but seems softeven enthusiastic! on free trade agreements. Hes left the door open to suits that threaten his treasury and his domestic programs. México is already facing $6 to $8 billion in pending corporate claims. But AMLO doesn’t seem aware of the problems.


How can we strengthen the alliance of all those concerned about our planet’s future?


Environmental activists need to be aware of the dangers of ISDS and other trade and investment rules. These rules could undermine commitments made at COP26 and shield corporations that pollute and destroy entire ecosystems.

The IDS rules give people at risk zero voice. In a current case before the World Bank tribunal, the US company Odyssey-Marine wanted a permit for an underwater mining project off the coast of Baja California. Drilling would destroy the local, fishing-based economy and pollute the area’s ocean and shore. Odyssey-Marine, after not getting its permit, filed suit against México — for $3.5 billion!

The Center for International Environmental Law and a fishing co-op have filed an amicus brief in the case. But the World Bank tribunal has the choice not to even consider the brief. Still, victory hasn’t yet become impossible. Look what happened in El Salvador.


Activists there put together an unlikely coalition that included parties that fought on opposite sides of their civil war. They passed a national ban on gold and metal mining that would have poisoned their water supply. And, against all odds, they defeated the Pacific Rim mining company in an ISDS case. What the Salvadorans all realized: Water will always be more valuable than gold.