NEW YORK (20 October 2023) – A UN expert has warned of the devastating effects of Investor-State dispute settlement with dire consequences for a wide range of human rights and climate action.

“At a time when it is imperative that States accelerate the pace and ambition of climate and environmental action to prevent planetary catastrophe and fulfil their human rights obligations, a daunting obstacle has emerged,” said David Boyd, the UN Special Rapporteur on human rights and the environment presenting his report today to the General Assembly.

His report chronicles compelling evidence that a secretive international arbitration process called investor-State dispute settlement has become a major obstacle to urgent actions needed to address the planetary environmental and human rights crises.

“Foreign investors use the dispute settlement process to seek exorbitant compensation from States that strengthen environmental protection, with the fossil fuel and mining industries already winning over $100 billion in awards,” the expert said. “Such cases create regulatory chill.”

The surge in fossil-fuel ISDS claims could not come at a worse time. Humanity has reached the now or never point for achieving the Paris Agreement objective of limiting global warming to 1.5°C, a goal that requires achieving net zero emissions by 2050 - incompatible with new coal, oil or gas developments.

Governments fulfilling their commitments under the Paris Agreement on climate change may be liable to oil and gas corporations for $340 billion in future ISDS cases – a major disincentive for ambitious climate action.

“As ISDS arbitration tribunals routinely prioritise foreign investment and corporate interests above environmental and human rights considerations, ISDS claims have devastating consequences for a wide range of human rights, exacerbating the disproportionate harms suffered by vulnerable and marginalised populations,” the expert said.

As the overwhelming majority of fossil fuel and mining ISDS claims are brought by investors from the global North against respondent States in the global South, the ISDS system has especially devastating consequences for the global South, perpetuating extractivism and economic colonialism.

The Special Rapporteur identifies specific actions that States must take to avoid future claims under the investor-State dispute settlement process and fulfil their human rights obligations in his report.