Fossil Fuel corporations use ISDS against climate action - podcast

Monday, October 10, 2022: This 41 minute podcast from the Conversation explains how an obscure investment provision in many trade agreements is being used by the fossil fuel sector to block action to cut carbon emissions.

Gemma Ware and Neil Merino interview four researchers on the latest state of play: Emilia Onyema, an arbitrator and academic at the University of London; Kyla Tienhaara, a researcher at Queens University, Canada; Lea di Salvatore, a PhD student at the University of Nottingham, and Maria-Rita D’Orsogna, Professor of mathematics at California State University.

The podcast explores the potential for Investor-State Dispute Settlement (ISDS) clauses in investment and trade agreements to jeopardise global efforts to save the climate – costing countries billions of dollars in the process.

In April 2022, a summary report by the UN’s Intergovernmental Panel on Climate Change singled out ISDS clauses saying that they may “limit countries’ ability to adopt trade-related climate policies” and stick to their commitments under the 2015 Paris Agreement.

In a recent study, Tienhaara and her colleagues estimated that countries could face up to US$340 billion in financial and legal risk from cancelling fossil fuel projects covered by ISDS clauses.

Some countries are more vulnerable than others because of the nature of the contracts they’ve entered into. Mozambique, with its large gas and coal reserves, is particularly so, explained Lea Di Salvatore.

She analysed 29 of the country’s mega-projects for gas, coal and hydrocarbons and found that the vast majority are covered by ISDS clauses. This means that “the company can directly go and initiate an arbitration against Mozambique” if it feels a government policy has negatively affected its investment.

Emilia Onyema sits as an arbitrator, but not yet on fossil fuel cases. “It’s a private process,” she explains. “The parties determine who the arbitrator is. They appoint the arbitrator. They pay the arbitrator. So they have more powers over the process than they would have in litigation.”

In 2016, Italy banned oil drilling 12 nautical miles off its coast, which blocked the UK Rockhopper Exploration’s drilling of the offshore Ombrina Mare field in the Adriatic Sea. Maria-Rita D'Orsogna, who campaigned against oil exploration in Abruzzo, explained what happened when Rockhopper successfully sued Italy using ISDS in the Energy Charter Treaty.

There is a fight back against ISDS, including moves to reform the Energy Charter Treaty, and many countries are moving to limit their risk from ISDS climate arbitration.