The legal block on climate action
Colombia is to withdraw from the Investor-State Dispute Settlement (ISDS), an opaque mechanism allowing foreign investors to sue governments for decisions that affect their profits, including those aimed at protecting human rights, worker rights, health and the environment.
Cases are heard by international arbitration tribunals rather than national courts. There are no independent judges, nor a right to appeal. The tribunals are closed to citizens, companies, NGOs and the media.
The grounds for the case are not published, nor are decisions. Compensation paid by governments to corporations comes from public budgets.
Block
ISDS has been used by tobacco giant Philip Morris to sue Australia for introducing plain packaging on cigarettes, Anglian Water to sue Argentina for guaranteeing affordable water for citizens, and German coal giant RWE to take the Dutch government to court for their decision to phase out fossil fuel consumption.
The clauses are commonly included in trade and investment agreements, which total around 2,500, and to contracts including those governing fossil fuels.
More than 10,000 fossil fuel assets worldwide are covered by ISDS provisions, a UN report by human rights rapporteur David Boyd found.
The mechanism has frequently been used by fossil fuel companies to block or deter climate action. Investors in fossil fuel and mining projects have launched more ISDS cases than any other sector.
In fact, disputes in the oil, gas and mining sectors accounted for the largest portion of new claims filed in 2025, representing 45 per cent of new cases, the ICSID found. This is a sharp increase from 25 per cent in the previous year and compares to a 26 per cent historical average.
Transition
They also tend to win. In total, fossil fuel businesses have reaped at least US$100 billion, Boyd's report found. The average award in published arbitration awards concerning fossil fuels is $600 million – five times the average amount awarded in arbitrations related to non-fossil fuels.
Large awards are made even if corporations have made next to no investment, because companies can sue for the amount that they calculate that they would have extracted for the length of the term of the concession.
Even when they win, governments are faced with huge legal costs, averaging $5 million, Boyd found.
Critics of ISDS say that it effectively protects fossil fuel assets against state action, and blocks climate action both directly through forcing governments to divert funding they could spend on the transition, and indirectly through putting them off regulations that could land them in front of tribunals.
Governments including New Zealand and Denmark have admitted to delaying restrictions on fossil fuel projects for fear of attracting ISDS arbitration. The Spanish government has also commented on how ISDS was being used to prevent energy transition after more than 50 ISDS claims, seeking compensation totalling more than $11 billion, were filed against it.
Concessions
This has been acknowledged by the Intergovernmental Panel on Climate Change, and the UN's special rapporteur on human rights David Boyd, while Nobel Prize winning economist Joseph Stiglitz has called ISDS 'legal terrorism'.
The Colombian government currently has 28 ISDS cases filed against it, 16 of which are concerned with fossil fuel extraction, according to Louise Winstanley, programme and advocacy manager for campaign organisation AB Colombia.
These include mining giant Glencore suing the Colombian government for $489 million after the country's Constitutional Court suspended a proposed expansion to the Cerrejón open-pit coal mine in 2017 due to its impacts on the environment, health and human and indigenous rights.
The total value of the claims against Colombia is estimated at more than 13% of its annual budget.
The risk of having to pay out substantial amounts of money is blocking Colombia's ability to restrict fossil fuels. At COP30, the Colombian government declared an end to all future large-scale oil and gas concessions in the Colombian Amazon, which covers approximately forty-two percent of Colombian national territory.
Burden
However, while this makes the country's Amazon off-limits to new fossil fuel extraction, the threat of being sued for millions of dollars poses a major financial obstacle to addressing more than 200 existing projects, according to Colombian environment minister Irene Vélez Torres.
"No government should have to choose between protecting nature and its people, and protecting itself from arbitrators," she told COP30.
ISDS payouts represent a further strain on its budget that is already under pressure from the aftermath of COVID-19, large-scale migration from Venezuela and withdrawal of funding from US Aid, according to Winstanley.
"The burden of addressing the climate crisis lies with those bio-biodiverse countries like Colombia, that are least responsible but are paying the highest costs, and whose budgets are some of the least robust.
"The ISDS is not only a barrier to action on the climate crisis, but it also means a growing debt burden," she says.
Signal
Petro's move followed a letter from economists calling for multilateral action to exit ISDS.
The experts, including Joseph Stiglitz, Ha-Joon Chang, and Thomas Piketty, wrote: "In practice it has become a tool through which corporations can challenge non-discriminatory public policies on the basis that they affect corporate profitability, rather than because they discriminate against investors."
"This dynamic raises significant concerns about states' ability to regulate freely in the public interest, including in the context of climate action," they added.
Colombian president Gustavo Petro responded on social media: "I accept the invitation from 200 global economists to change the global investment regime."
Observers welcomed the move, saying it sent an important signal ahead of the Conference on Transitioning Away from Fossil Fuels it is hosting in Santa Marta at the end of April.
Discriminated
Though the announcement was a reiteration of a previous pledge made by Petro, campaigners hope that action will be rapid. An election for the presidency is slated for 31 May, notes Tom Wills, director of the Trade Justice Movement.
"If anything is going to happen, it's going to have to happen really fast, and with the support of Colombia's investment treaty partners, including the UK," he says.
A spokesperson for the Foreign, Commonwealth and Development Office said: "Our Bilateral Investment Treaty with Colombia helps both UK and Colombian investors resolve disputes where they claim to have been unfairly treated or discriminated against without compensation.
"We continue to work with trading partners, including the OECD and the UN to improve the system," they added.
Withdrawal
The number of known ISDS cases targeting actions taken by states to protect the environment has skyrocketed, from 12 initiated prior to 2000 to 37 in the period 2000-2010 and 126 in the period 2011-2021, Boyd's report revealed.
Last year saw 63 new cases lodged, the second highest in the mechanism's history after 2021, when 66 cases were initiated, according to data from the International Centre for Settlement of Investor Disputes (ICSID), part of the World Bank.
However, in recent years, several countries have pulled out of ISDS due to its incompatibility with climate change action.
Countries including Bolivia, Ecuador, India, Indonesia, and South Africa, have already taken steps to terminate their investment treaties, notes Bart-Jaap Verbeek senior researcher at Dutch investigative organisation SOMO.
Even countries in the Global North, including traditionally strong supporters of ISDS, are shifting, he says, pointing to Australia, which no longer includes ISDS in new treaties and has sought to remove such provisions from existing ones, and the US and Canada which have eliminated ISDS in their renegotiated North American trade agreement.
Investors
In 2024, the European Council gave the green light to the bloc's withdrawal from the Energy Charter Treaty (ECT), which has attracted more ISDS claims from fossil fuel companies against states than any other investment treaty, according to the International Institute for Sustainable Development (IISD).
Think tank E3G estimated the treaty protected more than 300 megatonnes (Mt) of greenhouse gas (GHG) emissions.
Since then, EU states including Germany, France, Spain and the Netherlands have exited the ECT, though others adopted a modernised version. The proportion of cases bought under the treaty fell to five per cent, from 14 per cent the previous year, according to the ICSID.
The UK has also pulled out of the treaty, though it remains under the treaty's sunset clause, making it vulnerable to arbitration for a further 20 years.
It is already paying the price for this, and is being sued by the investors of the Whitehaven coal mine in Cumbria for its decision to block the project, and Russian billionaire Mikhail Fridman, for sanctions imposed when Russia invaded Ukraine.
Agenda
The event in Colombia came about after a proposal at COP30 to phase out fossil fuels failed, despite the backing of more than 80 countries. Colombia and the Netherlands decided to host a conference where supporters could move discussions forward.
The event will not lead to a new treaty on phasing out fossil fuels, nor replace the UNFCCC COP summits. Outcomes will feed directly into discussions at COP31 later this year via a roadmap on fossil fuels being prepared by Brazil.
More than 45 countries and the EU are scheduled to attend. The ISDS is explicitly mentioned in one of three agenda themes, needing to be dealt with in particular for its part in creating international legal barriers to tackling climate change.
Various multilateral attempts to talk about ISDS – including through the Organisation for Economic Cooperation and Development (OECD) – over the past 10-15 years have led nowhere, Wills explains.
"It's really exciting to have an international forum that's looking to engage with the ISDS system from the climate perspective," he says.
Recalibrating
There are several potential outcomes from the summit in terms of ISDS, according to Cleodie Rickard, campaigns and policy manager at Global Justice Now.
Governments could act domestically to commit to not negotiate, sign or ratify any future agreements containing ISDS and initiate termination of existing ones, and they could join together to work on collective disengagement from ISDS, and terminate any agreements that exist between themselves, she says.
The most comprehensive and effective method to address the spread of ISDS treaties would be a multilateral termination treaty that would automatically terminate investment agreements between all contracting parties.
"That's a much longer-term horizon goal because it would involve considering how that would work legally," she says.
Lorenzo Cotula, head of law, economies and justice at the International Institute for Environment and Development (IIED) believes the Santa Marta conference offers an opportunity to develop solutions to ISDS, recognising that previous attempts to deal with it by recalibrating treaty language has not delivered the systemic change required.
Treaties
"Questions about reform options are very technical, but in a sense, also simple. There are around 2,500 bilateral treaties in force worldwide, so it's very difficult to renegotiate them one by one.
"It can also be diplomatically awkward, particularly for low-and-middle income countries, to terminate or renegotiate treaties with countries that provide aid or are key trading partners.
"So that's where a coordinated approach is really helpful – instead of all these bilateral processes, states can develop one instrument that effects change in all of their treaties," he explains.
The OECD established a similar instrument a few years ago in relation to tax treaties, he points out.
Responsibility
But for the movement against ISDS to succeed, the support of more developed nations will be critical, campaigners argue.
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.
A 'scorecard' by the Trade Justice Movement found that the UK ranks worst overall in perpetuating the harm of ISDS, with UK investors particularly litigious in the mining and fossil fuel sector.
As summit co-hosts, the Netherlands has a responsibility to show leadership, believes Verbeek. Though the Netherlands played a key role in the EU's withdrawal from the Energy Charter Treaty, it is also a key hub for the ISDS system.
TJM's scorecard found the Netherlands close behind the UK, and that Dutch investors have initiated more corporate court cases than those of any other European country, in many cases utilising 'shell' companies without actual business activity.
Last year's Advisory Opinion by the International Court of Justice supports reform of the investment treaty system to ensure that instruments aimed at promoting investment do not promote climate-harmful investments and do not constrain climate action, points out Cotula.
Inertia
It was the first country to include ISDS in an investment treaty in 1968, with its former colony, Indonesia.
It has 70 active bilateral investment treaties that contain ISDS, one of the largest treaty networks in the world. Dutch treaties have been used in nearly ten per cent of all cases worldwide, second only to the US, he points out.
"The conference creates a unique political moment, and Colombia's recent announcement that it intends to withdraw from ISDS puts additional pressure on the Dutch government to clarify its position," he said.
The UK has also been central to the ISDS system. This has come about as a result of its imperial history, Whitehall inertia and lack of oversight by MPs, according to an investigation by Adam Ramsay for the Ecologist last year.
Mechanism
Though the UK has not included ISDS in any of the bilateral free trade deals it has struck since it left the European Union, it is a feature of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and an investment treaty with India signed in May 2025.
NGOs suspect the heavy presence of many law firms who represent investors in ISDS cases in the City of London could be behind the government's lack of decisive action. Third-party funders of arbitration – which the UN's Boyd blamed for the recent surge in cases – also have a heavy presence in the UK.
Its support for ISDS undermines rhetoric from its diplomats on the need for urgent action on climate change, Winstanley believes. She pointed to a recent speech by UK deputy permanent representative to the UN ambassador Archie Young, who repeated support for global climate targets, ending deforestation and pledged £6 billion in climate finance.
"You can't make these statements and pledge money to support countries who are moving away from fossil fuels, but not actually remove a mechanism that allows your companies to sue governments for those very changes that you've been asking them to make – it doesn't make any sense!" she says.
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