Investor-State Dispute Settlement Mechanisms and the Right to a Clean, Healthy and Sustainable Environment

Bilateral and multilateral trade and investment treaties often include investor-State dispute settlement (ISDS) mechanisms, which enable foreign investors to sue States for taking actions that adversely affect the value of their investments. These mechanisms can undermine States’ ability to take robust climate and environmental action to respect, protect, and fulfill the human right to a clean, healthy and sustainable environment.

Ahead of the United Nations General Assembly this fall, the Special Rapporteur on human rights and the environment put out a call for input for his report on ISDS mechanisms and the right to a clean, healthy, and sustainable environment.

He asked, “Should the interests of foreign investors trump the human right to a clean, healthy and sustainable environment?”

Together with the International Institute for Sustainable Investment (IISD) and CIEL, ClientEarth submitted analysis and recommendations to inform the report. The submission makes the following points:

1. State experience and public participation in ISDS claims challenging measures intended to address climate change; protect the environment; or advance the right to a clean, healthy, and sustainable environment.
2. ISDS claims are numerous, often opaque, and largely inaccessible to the public.
3. Investors employ ISDS as a lobbying tool to restrain regulatory action, yet its impact remains inadequately documented due to a lack of transparency.
4. States have not always been effective in attempting to protect themselves from future ISDS claims, reforms have failed to limit risks, and new treaty language is insufficient, leaving termination as the best policy option.
5. Obstacles faced by States participating in international processes intended to reform ISDS mechanisms
6. While investment treaties have negligibly demonstrated positive effects on foreign investment flows, their ISDS mechanisms engender disproportionate negative impacts on human rights and the environment.