Corporations Have the Power to Sue Governments Over Resource Extraction Policies

Extractives corporations not only use the ISDS system the most, they also receive the largest monetary awards. Out of the 14 known awards for more than $1 billion, 11 pertain to oil, gas and mining.

There are at least 82 known pending ISDS cases brought by extractive industries. Of the 42 where information is available, the companies are demanding a total of $99.1 billion ($71.1 billion by mining companies and $28.1 billion by oil and gas companies).

Notably there are 40 pending cases where the amounts being claimed are not available, so the figures above are only partial. But from the information available there are at least 14 pending cases for more than $1 billion, with ludicrous suits against Congo for $27 billion and Colombia for $16.5 billion topping the list. Another case in which a corporation is demanding $16 billion, TC v. USA, for the cancelation of the controversial Keystone pipeline by the Biden´s administration, is not included in the table below because it has not yet been registered at ICSID. (Source: ICSID and UNCTAD)

In their lawsuits, corporations most often cite protections in FTAs and BITs against “indirect expropriation.” This is interpreted to mean regulations and other government actions that reduce the value of an investment. Hence, corporations can sue governments over the enforcement of environmental, health, and other public interest laws or measures arising from democratic or judicial processes. While investment tribunals cannot force a government to repeal laws and regulations, time-consuming, costly litigation and the threat of massive awards for damages often put a “chilling effect” on responsible policy-making.

There has been some movement in recent years to roll back these excessive corporate powers. The European Court of Justice, for example, has ruled that European Union energy companies will not be able to use the Energy Charter Treaty (ECT) to sue EU governments. The U.S.-Mexico-Canada Agreement that replaced NAFTA eliminates ISDS between Canada and the United States.

But for the most part, international agreements that allow corporations headquartered in rich countries to continue to wield this weapon against development country governments remain in force, reinforcing neo-colonial North-South relations.

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Manuel Perez-Rocha