As deadly heatwaves become more common around the world, governments are finally recognising the need for genuine climate leadership. In a positive sign that countries are moving towards sincere efforts at decarbonising, 57 nations met in April in Santa Marta, Colombia, for The First International Conference on Transitioning Away from Fossil Fuels.
The conference was groundbreaking for many reasons. One was that it brought overdue attention to an issue that leaves a gaping chasm in existing climate plans and policies: international investment treaties.
Investment agreements signed by governments actively prop up the power and influence of fossil fuel companies, undermine the global transition, and shred national claims to climate leadership.
These bilateral agreements often contain an astoundingly unjust provision called Investor-State Dispute Settlement (ISDS). ISDS allows foreign investors to sue host states for huge sums when government policies reduce their future profits. Cases are heard not in international or domestic courts, but in secretive tribunals presided over by private lawyers.
Fossil fuel companies have used ISDS to successfully claim at least $83 billion in public money. The true climate costs of ISDS are likely much higher, as successful claims have created a chilling effect, especially amongst poorer nations. Governments have admitted to diluting or delaying climate policies for fear of being sued. ISDS enables the world’s most polluting industries to undermine any attempts to cut into their destructive – but highly profitable – business model.
The UK illustrates the tensions presented by ISDS. A clear commitment to global climate goals has translated into an impressive domestic record on decarbonisation. The UK is getting off the fossil fuel rollercoaster – which is good news for growth, jobs, household bills and national security. On the international stage, however, the UK is a major centre for fossil fuel ISDS cases. UK companies have sued other countries via ISDS more than 100 times, and most of those cases have been brought by fossil fuel or mining companies.
The problem is getting worse by the month. Shell is using the ISDS provisions of UK agreements to sue the Netherlands after the Dutch government closed the Groningen gas field, where decades of fracking have led to more than 1600 earthquakes.
Shell also has an ISDS case against Tunisia, apparently to avoid being held liable for decommissioning gas projects off the Tunisian coast. Lansdowne Oil & Gas is suing Ireland for at least $100m for refusing permission to exploit an offshore oil field. INEOS is suing Belgium for cancelling a permit for part of a new chemical factory in the Port of Antwerp.
The Netherlands itself is another state making impressive strides towards decarbonisation at home, while aggressively defending its companies’ right to pollute other nations. Since 1990, Dutch carbon emissions per GDP are down 65%, but recent analysis reveals fossil fuel companies have made 31 ISDS claims via Dutch investment agreements.
The Dutch government showed global leadership in co-hosting the Santa Marta conference, but failed to support the anti-ISDS position of their co-hosts Colombia, watering down the event’s closing statement to solely mention ISDS as something “perceived as creating barriers, while the extent to which these barriers are perceived varies”.
If ISDS remains unchallenged, it risks every climate policy costing far more than imagined, in order to compensate the industries that caused and profited from climate breakdown. In an outrageous reversal of the polluter pays principle, taxpayers will be forced to reward companies that have continued to invest in fossil fuels, instead of charging them for climate action. Campaigners have compared this to the compensation paid to former slaveowners in the 1830s by the British government, which created a debt burden taxpayers were repaying until 2015.
There is a clear path forward to avoid this. These treaties are outdated relics of a different era, and governments are increasingly recognising that investment rules must keep pace with the need for climate action. Fortunately, it is simple: to cast these treaties aside.
In the past decade, more than 300 treaties containing ISDS have been terminated and not replaced. South Africa, India and Indonesia are among countries to have taken this approach. Australia has committed to excluding ISDS from future treaties, and has not signed an ISDS agreement since 2022. Colombia repudiated ISDS in 2026, in the wake of a letter to President Petro from academics including Joseph Stiglitz and Thomas Piketty.
The movement against ISDS must go much further. There are still more than 2,800 international investment treaties in operation that contain ISDS. There are hopeful signs of progress, however, as governments begin to realise there is no downside to ending ISDS. The argument that ISDS is needed to encourage foreign investment has been repeatedly debunked. A 2020 analysis of 74 separate studies found the link between ISDS and investment to be “so small as to be considered zero.”
Climate leadership is not only about getting policies right domestically. A truly global crisis can only be tackled if countries show solidarity with one another. If fossil fuel companies are able to use ISDS to claim huge figures of compensation, it will undermine climate action for us all.
Tom Wills is the Director of the Trade Justice Movement, the UK’s coalition of trade unions, charities and campaigners working for fairer global trade rules.
