CIEL | 8 November 2024
International investment law and ISDS: Overcoming legal barriers to effective climate action under the UNFCCC and the Paris Agreement
The urgent need to address climate change is hindered by legal barriers within international investment law, particularly through Investor-State Dispute Settlement (ISDS) mechanisms. ISDS provisions enable foreign investors to sue governments over climate policies that affect their investments, particularly in the fossil fuel sector. This legal threat has a chilling effect on governments, deterring them from implementing necessary climate policies and measures to phase out fossil fuels—the primary drivers of climate change.
Our brief, International Investment Law and ISDS: Overcoming Legal Barriers to Effective Climate Action under the UNFCCC and the Paris Agreement, explores how ISDS provisions in investment agreements allow foreign investors to sue governments over climate policies that may affect their investments, undermining international efforts to limit global warming.
Our report argues that ISDS provisions act as subsidies for fossil fuel industries, conflicting with the Paris Agreement’s provisions aimed to align financial flows with low emissions pathways. Our report calls for a coordinated global response to reform international investment frameworks, urging policymakers, especially ahead of COP29, to address ISDS risks in Nationally Determined Contributions (NDCs) and develop initiatives to withdraw from or amend ISDS provisions, empowering states to implement robust climate policies without fear of legal repercussions.