ISDS allows foreign investors to sue our Government

Investor-State Dispute Settlement

Investor-State Dispute Settlement (ISDS) pitfalls

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 consist 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  983 known 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, minimum wage rises 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-powered energy. Read about more cases  here. 

  • Workers wages: The French Veolia company sued  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  A$36 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  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: when even winning is losing

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 that agreement had no ISDS clause. 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 was  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 FOI case decision that it should reveal the costs, but  on July 2, 2018  released  total figures for the High Court case and the Philip Morris case  that showed a total of $39 million. 

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 in February 2019 h 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.

This confirms that, 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.

See also AFTINET's submission to DFAT's review of Australia's bilateral investment treaties which documents Australiian mining companies suing low-income countries here. (September 2020).

Learn more

Updated February 2021

UK Australia FTA announcement hides possible nasties on corporate rights and medicine monopolies in secret deal

MEDIA RELEASE                                                                            

June 15, 2021

“The announcement of ‘in-principle’ agreement for an Australia-UK free trade agreement continues the unacceptable government secrecy about the details of the agreement,” Dr Patricia Ranald, AFTINET Convenor said today.

Final UK FTA talks on corporate rights to sue governments alarm community groups

MEDIA RELEASE, May 31, 2021

“The British Trade Minister has confirmed that corporate rights to sue governments are being discussed in the final negotiations for the Australia-UK Free Trade Agreement before an announcement at the G7 meeting in the UK on June 11-13. This is unacceptable and will fuel community opposition to the deal in both Australia and the UK,“ Dr Patricia Ranald, Convenor of the Australian Fair Trade & Investment Network said today.

Pakistan prepares to eliminate ISDS from its Bilateral Investment Treaties

April 8, 2021: Pakistan’s Board of Investment has prepared a strategy to withdraw from all inhibiting clauses in the 53 Bilateral Investment Treaties the country has with 48 countries, including Australia.

The major concerns are provisions related to investor-state dispute settlement (ISDS). These shrink the policy space for the government to adopt measures in the public interest.

“Super-protections” for global corporations – New Dutch study of ISDS

March 17, 2021: The February 2021 action by the German energy company RWE to sue the Netherlands government using the Investor-State Dispute Settlement (ISDS) provisions of the Energy Charter Treaty has provoked a Dutch institute to compare investor rights under Dutch and EU law with investor rights under the 1994 ECT and the recent Canada – Europe Comprehensive Economic and Trade Agreement (CETA).

Pages