"Allowing foreign firms to sue governments for lost profits is legal terrorism – it must end". 7 March 2025.

Investor–state dispute settlements don’t just mean growing debt burdens for countries: they are also a barrier to action on the climate crisis.

...[A]mid the devastation, some things seem to be surviving that really should be taken down. Among the most notable of these is an arcane set of international agreements by which private investors can sue governments, known as ISDS: investor-state dispute settlement. These disputes are litigated not in public courts with impartial judges but in private arbitration – behind closed doors, and rife with conflicts of interest.

Early on, when they were snuck into many trade agreements, no one paid much attention. For instance, these provisions in Nafta, the so-called free trade agreement between the US, Mexico, and Canada, never got a discussion within the cabinet while I served in the Council of Economic Advisers under President Clinton when Nafta got adopted...

What the agreements do is provide companies with opportunity to sue for compensation when there is a change in regulation which they claim might impair their future profits. That compensation is not based only on what they lost – say their investment, that is no longer so profitable – but on what they might have received in profits...

Uruguay was sued when it proposed requiring cigarette companies to disclose that cigarettes are dangerous to one’s health – a disclosure that most advanced countries require. The labelling would, admittedly, discourage smoking – that was the point – and that in turn would hurt these companies’ profits. Fossil fuel companies around the world have sued as governments have undertaken actions to curtail emissions. As one of the lawyers specialising in these disputes said of the provisions: “It wouldn’t matter if a substance was liquid plutonium destined for a child’s breakfast cereal. If the government bans a product and a … company loses profits, the company can claim damages.”...

The world faces a debt and development crisis, and many countries have burdens of debt so high that they are encroaching into expenditures on health, education, climate, and development itself. These payouts are adding massively to this debt burden – and risk doing so even more. Globally, they are an impediment to climate action: countries are afraid if they pass a carbon tax or a carbon regulation they will be sued...

It’s time to end this travesty on justice. We need an overarching international agreement ending ISDS...

Ending this system is imperative: if we don’t, we’ll face a whole new set of barriers to preventing climate change; and developing countries and emerging markets will face ever-growing debt burdens– from increasing payouts to companies that ruin the health of citizens and the sustainability of the planet.