Governments worldwide are delaying environmental policies due to fear of billion-dollar lawsuits from fossil fuel companies under the investor-state dispute settlement (ISDS) system.
Phoebe Weston and Patrick Greenfield report for The Guardian.
In short:
- The ISDS system allows companies to sue governments over policies that could harm their profits, including climate regulations.
- Governments in countries like Romania, Italy, Mexico, and New Zealand have altered or abandoned environmental laws to avoid litigation.
- A Guardian investigation found that fossil fuel companies have received $84 billion in payouts, with the average claim exceeding $1 billion.
Key quote:
“My impression from working closely with governments is that ISDS is now increasingly on their radar, that is it’s increasingly an issue for them to consider: whether implementing a particular policy might give rise to claims.”
— Toby Landau, arbitration lawyer
Why this matters:
The ISDS system is shaping global climate policy, often in favor of fossil fuel companies. Countries that attempt to phase out oil, gas, and coal face the threat of costly legal battles, leading to weaker or delayed environmental regulations. Developing nations, in particular, struggle with the financial burden of these lawsuits, sometimes amounting to a significant portion of their GDP. As the climate crisis accelerates, the legal power of corporations to challenge green policies raises concerns about whether governments can effectively transition to renewable energy without facing financial ruin.
Read more: Fossil fuel company’s lawsuit against Greenpeace heads to trial in North Dakota
