Investor-State Dispute Settlement (ISDS) Poses a Threat to Climate Action adn Human Rights
A new brief from the Center for International Environmental Law (CIEL), titled “The International Investment Legal Regime, Climate Change, and Human Rights: An Overview” (October 2025), details how the current system of Investor-State Dispute Settlement (ISDS) actively hinders global efforts to address climate change and protect human rights.The report argues that ISDS directly conflicts with the growing international consensus on the urgent need for bold climate action.
The brief highlights a crucial point: recent rulings from international courts are strengthening the legal basis for robust climate policies. These landmark advisory opinions from the International Court of Justice and the Inter-American Court of Human Rights confirm that states have legally binding obligations, under international law, to regulate polluting industries in order to safeguard human rights and mitigate climate harm. Tho, ISDS allows corporations to circumvent domestic legal systems and challenge these very regulations before private, ad-hoc tribunals.
These tribunals have the power to award considerable financial compensation – potentially billions of dollars funded by taxpayers – to corporations whose investments are affected by public interest regulations. This creates a “regulatory chill,” discouraging governments from implementing the necessary policies to phase out fossil fuels and transition to a lasting economy. Fossil fuel companies have already initiated over 300 ISDS cases, seeking more than $80 billion in damages related to policies designed to reduce reliance on oil, gas, and coal.
CIEL’s report builds upon their previous work and outlines several key concerns: ISDS undermines national sovereignty and obstructs a just energy transition. Moreover, it asserts that obligations related to climate change and human rights should take precedence over corporate interests.
The brief proposes concrete steps states can take to mitigate the threat of ISDS, including: withdrawing from treaties containing investment arbitration provisions, specifically excluding fossil fuels from investment protections, and aligning trade and investment rules with international human rights obligations.
The report concludes that as nations accelerate climate action, dismantling the legal framework that shields polluters is essential to prevent a surge in future ISDS claims and ensure that protecting people and the planet does not come at the cost of financially rewarding polluting industries. The full brief is available for review at https://www.ciel.org/wp-content/uploads/2025/10/International_Investment_Legal_Regime_Climate_Change_and_Human_Rights_An_Overview.pdf.
