Limiting Corporate Powers To Sue Governments Over Extractives Policies

Next week international negotiators are meeting in Glasgow, Scotland to develop solutions to the climate change threat. But one major obstacle to global sustainability will be largely absent from the discussions: the investor-state dispute settlement (ISDS) system.

This system gives transnational corporations the power to sue governments over actions — including policies to address climate change — that reduce the value of their foreign investments. Allowing corporations to continue to wield this power could undermine whatever agreements might be reached in Glasgow.

How does this system work? Clauses in more than 2,600 Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs) allow foreign investors to bypass domestic courts and sue sovereign states in international tribunals for millions — and even billions — of dollars.