by Nele Marien (Friends of the Earth International)
One big elephant in the room, preventing the halting and reversal of biodiversity destruction is the global legal system, which puts economic law above environmental law, with severe sanctions for non-compliance, while environmental agreements such as the CBD don’t have functional compliance mechanisms.
The corporate-influenced system of Investor–State Dispute Settlement (ISDS) is the maximum expression of this. The mechanism lets a foreign investor sue a state before an international arbitration tribunal, when it considers a country applies measures that threaten their expected return on investments. Under most International Investment Agreements, foreign investors can use ISDS courts when countries increase their environmental legislation, or when they don’t issue an environmental permit. Companies can claim financial compensation from the countries in which they have invested, or intended to invest, including for the loss of anticipated future profits.
ISDS awards routinely run into the hundreds of millions of dollars, with more than 152 known cases of over USD 1 billion. For example, the Tethyan Copper Company sued Pakistan after its application for a mining lease at the Reko Diq mine was rejected. An ISDS tribunal awarded the company US$5.8 billion - more than 25 times the invested amount. After a settlement, this very destructive mine was given permission to operate.
Regulatory chill
Facing debt, austerity and dependence on hard currency from extractive development models, governments know that creating or expanding a protected area, cancelling a concession, or simply tightening a standard can trigger litigation. Ministers in several countries have acknowledged this “regulatory chill” effect. The mere possibility of a large claim functions as a deterrent, and companies use ISDS threats strategically to shape policy before any tribunal convenes.
ISDS also allows corporations to undo measures already adopted: 17% of known cases end in "settlements" rather than final awards, which in most cases implies that the increased protection of biodiversity is rewinded, in order to avoid expensive claims or the expensive legal proceeding costs.
The amount of ISDS cases is increasing sharply: from 12 environmental ISDS cases before 2000, to 126 between 2011 and 2021. The sectors driving biodiversity loss are among the most litigious: fossil fuel corporations account for 20% of total cases and mining for 11%. Global South countries are respondents in roughly 62% of cases.
Addressing the elephant
While the CBD can’t change the global legal system, it can study the impact of ISDS on biodiversity policies and outcomes, and can bring the topic to other relevant fora for their consideration.
Halting and reverting biodiversity loss should not be made impossible through global legal systems. On the contrary, they should serve people and biodiversity rather than corporate interests.
Read The legal system that privileges corporate rights over environmental regulations in the report “We Need to Talk About the Elephants in the Room”