Not a fair legal system:
ISDS gives special rights to foreign investors (that are not available to local investors) to bypass national courts and sue governments for millions of dollars if they can claim that a change in law or policy will harm their investment.
The tribunals which hear the claims are not courts but tribunals of investment lawyers who can continue to be practicing lawyers, with obvious conflicts of interest. Australia’s High Court Chief Justice and other legal experts have said that ISDS is not a fair legal system because it has no independent judges, no precedents and no appeals. There are over 850 outstanding cases, many against health, environment and other public interest laws.
Increasing numbers of ISDS cases against public interest legislation
Recent ISDS cases against health, environment and other public interest legislation include:
Public health: The Swiss pharmaceutical company Novartis threatened to sue the Colombian government over plans to reduce the price of a patented medicine to treat leukaemia. Read about more cases here.
Environment: the US Bilcon company won millions of dollars of compensation from Canada of because its application for a quarry development was refused by a local government for environmental reasons. The US Westmoreland coal mining company is suing the Canadian government because the state of Alberta decided to phase out coal-powerd energy. Read about more cases here.
Workers wages: The French Veolia company is suing the Egyptian government over a contract dispute in which they are claiming compensation for a rise in the minimum wage.
Indigenous land rights: An ISDS tribunal ordered the Peruvian government to pay $24 million to the Canadian Bear Creek mining company because it cancelled a mining license after the company failed to obtain informed consent from Indigenous land owners about the mine, leading to mass protests. ISDS rewarded the company for ignoring Indigenous land rights.
Privatisation: Mexican transport company ADO has threatened Portugal with a €42 million ISDS case after it cancelled plans to privatise part of Lisbon's public transport network.
Philip Morris tobacco company vs Australia
Even if a government wins the case, defending it can take years and cost tens of millions of dollars. For example, tobacco companies lost their claim for compensation for Australia’s 2011 plain packaging legislation in Australia’s High Court. The US-based Philip Morris company did not accept this decision under Australian law. The company could not sue under the US-Australia FTA because the Howard government had not agreed to an ISDS clause in that agreement. The company found a Hong Kong-Australia investment agreement containing ISDS, shifted some assets to Hong Kong, claimed to be a Hong Kong company and sued the Australian Government, claiming billions in compensation. It took over four years and millions in legal fees for the tribunal to decide the threshold issue in December 2015 that Philip Morris was not a Hong Kong company.
Although the tribunal in July 2017 eventually awarded a proportion of the legal and arbitration costs to Australia, the proportion and amount of the costs were blacked out in the tribunal’s cost decision. This is a failure of public accountability both by the tribunal and the Australian government, as taxpayers have a right to know the costs of defending ISDS cases. Community organisations called for the Australian government to reveal the costs. The government initially appealed an Australian Information Commissioner decision that it should reveal the costs, but finally released records of invoices for legal services on July 2, 2018 that showed a total of $39 million.
The government later claimed the $39 million included the ISDS case, the earlier Australian High Court challenge and a WTO case supported by the tobacco companies. This only appears to include the cost of legal services and may not include the vast amounts of non-legal internal staff time spent on the three cases by public servants in the departments of Health, Attorney Generals and Foreign Affairs and Trade.
The government refused to reveal the specific ISDS legal costs and what percentage of the total costs had been awarded to Australia.
The most recent FOI case on the ISDS costs, launched in 2017 by a legal publication, took another two years to reveal last month that Australian taxpayers were awarded only half of the costs of almost $A24 million in both legal fees and arbitration costs, despite the finding that the case was an abuse of process.
This cost decision reinforces the case against the ISDS system. Australia could afford to defend the case, but $12 million is still a loss to taxpayers that could have been spent on health or other community services. Developing countries simply cannot afford these costs.
Even if governments win ISDS cases, defending them takes years (in this case seven years before costs were awarded) and tens of millions of dollars.
Updated March 2019