Mobilising climate finance requires removing barriers that distort investment decisions and divert public resources from climate action. One such barrier is the international legal framework made up of more than 2,600 investment treaties in force.
Investment treaties, through a special dispute settlement mechanism called investor-state dispute settlement (ISDS), allow foreign investors to challenge host governments’ legitimate regulatory measures before international arbitration tribunals. If successful, foreign investors can win compensation awards, often based on speculative assumptions about future profits.
Compensation awards in the hundreds of millions of dollars as a result of ISDS claims can have a significant impact on developing countries, exacerbate their debt burden, and reduce public money available for climate action. For instance, in 2019, Pakistan was ordered to pay more than $5.8 billion for not approving the development of a gold and copper mine, which was tantamount to the bailout Pakistan secured from the IMF in the same year.
Investment treaties with ISDS provisions support foreign investments in the fossil fuel sector by providing legal protection. The ISDS provisions send the wrong signals to the market that governments will protect fossil fuel interests, which can prevent progress towards achieving Article 2.1(c) of the Paris Agreement.
The ISDS mechanisms also affect governments’ policy space and regulatory autonomy, and the fear of high-value compensation claims can delay ambitious climate action.
What to expect
This event will examine how investment treaties and ISDS provisions impact the ability of countries, particularly developing nations, to scale up climate finance and implement ambitious climate policies. Experts will identify potential policy reforms and concrete actions to address investment treaties and ISDS including within the UNFCCC.
This event is co-organised by E3G, CIEL, IIED, SEATINI and South Centre.
Speakers
- Elisa Morgera, UN Special Rapporteur on Climate Change and Human Rights
- Niki Kruger, Chief Director: Trade Policy and Negotiations, Department of Trade, Industry and Competition, South Africa
- Peter Horne, Director, Climate Diplomacy Branch, Department of Foreign Affairs and Trade, Australia
- Hamed El Kady, Chief, International Investment Agreements Section, UN Trade and Development (via recorded video)
- Eunjung Lee, Senior Policy Advisor, Clean Economy, E3G
- Camilla More, Researcher, Climate Change, International Institute for Environment and Development (IIED)
- Herbert Kafeero, Programs and Communications Manager, Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI)
- (Moderator) Melissa Blue Sky, Senior Attorney, Center for International Environmental Law (CIEL)
