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Fossil fuel companies are using "secretive" private international tribunals to block governmental climate action through lawsuits

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Oil and gas investors are using a little-known legal tool to successfully argue that climate policies are cutting into their profits.




Fossil fuel investors are adopting a bold new legal tactic in response to efforts to limit global warming: They are going to private international tribunals to argue that climate change policies are illegally cutting into their profits, and they must therefore be compensated. Now governments are scrambling to figure out how to not get sued for billions when enacting climate policies.


Termed “investor-state dispute settlement” legal actions,  such moves could have a chilling effect on countries’ ability to take climate action. Consider this case from 2017: Nicolas Hulot, France’s environment minister at the time, drafted a law that sought to end fossil fuel extraction in the country by 2040. In response, Vermilion, a Canadian oil and gas company, threatened to use such a settlement provision to sue the French government. In the end, the French law was watered down to allow new oil and gas exploration even after 2040.


When these legal actions move forward, the results tend to benefit oil and gas interests. A recent report on investor-state dispute settlement (ISDS) actions found that when such cases were decided on by their merits, fossil fuel investors emerged victorious 72 percent of  the time — earning, on average, $600 million in compensation.




The ISDS provisions in the Trans-Pacific Partnership played a key role in Congress’ failure to ratify the TPP. The trade agreement’s proposed ISDS expansion was met with widespread concern across the political spectrum, with those on the left opposing it because of the additional power it would have handed multinational corporations and foreign investors to wreak havoc on public health and the environment, and those on the right opposing the idea of allowing international tribunals to overturn U.S. law.



Over the years, some progress has been achieved in reforming ISDS provisions. In 2018, NAFTA was renegotiated to remove ISDS clauses between the U.S. and Canada, and the clauses were scaled back between the U.S. and Mexico.


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