by George Kahale III
24 March 2022
As someone who has been an active participant in ISDS for the past fifteen years and acted as lead counsel in several of the world’s largest international arbitrations, I fully support this OECD initiative and any other that would dedicate intergovernmental attention to the threat that ISDS poses, not just for climate change policy but more broadly for the ability of states to exercise their sovereign prerogatives in addressing environmental, health, safety and other issues of public interest.
A recent law firm bulletin reveals why there should be concern about the ISDS threat in the context of climate change policy. It says:
“ISDS is therefore likely to be an increasingly important avenue
for the resolution of climate change disputes. Companies in
industries most affected by States’ climate change obligations
(e.g., fossil fuels, mining, etc.) should audit their corporate
structure and change it, if needed, to ensure they are
protected by an investment treaty. Such restructuring should
take place before any climate-related dispute with the State
has arisen or is reasonably foreseeable. Notably, some
treaties have superior investor protections than others. It is
thus important to assess which treaty would best protect the
company from any adverse climate-related government measures.”
In fact, there is little doubt that many investors, third-party funders and their counsel are eyeing ISDS with a view to challenging, and even profiting from, governmental action relating to climate.
I have previously written and spoken in detail about the problems and dangers of ISDS, as seen from my vantage point as counsel defending respondents in ISDS cases. Of course, opinions on the subject vary greatly. There is no shortage of defenders of ISDS, who wax eloquent about its function in promoting foreign direct investment (FDI) and providing a neutral, peaceful way of settling investment disputes. On the other side, critics of ISDS question whether it really has a discernible positive impact on FDI and see investment treaties as weapons of legal destruction.