The hidden harm of ISDS: Which European countries score worst?

New Ranking of European countries’ involvement in ISDS reveals high concentration among key EU countries

A new ranking of European countries’ involvement in ISDS – the opaque international corporate court regime that creates a barrier to climate justice – reveals the deep involvement of a small number of European countries. The report reveals that the UK, the Netherlands, Germany, France and Switzerland account for a disproportionate share of the treaties, cases and climate risk generated by this “shadowy” system. 

The new research published by a coalition of seven European organisations including PowerShift, Climate Action Network Europe and  Global Justice Now, comes ahead of the First Conference on Transitioning Away from Fossil Fuels, taking place 24 – 29 April in Colombia, at which the system of Investor-State Dispute Settlement, or ISDS, is up for discussion as a key barrier to phasing out fossil fuels. Seventeen of the countries ranked in the scorecard are slated to attend the conference, including co-host the Netherlands, who rank second overall.

The newly released report, ‘European ISDS Scorecard: a ranking of the harmful effects of 30 countries’ investment treaties’, is published today with an accompanying interactive ‘scorecard’. It assesses 30 European countries to capture the scale of their investment treaty networks, their real-world use and the impacts of investors weaponising ISDS across ten indicators, including number of ISDS deals signed and its use across sensitive sectors such as fossil fuels or the scale of pay-outs.The scorecard reveals:

• The UK ranks worst overall in perpetuating the harm of ISDS, with British investors particularly litigious in the mining and fossil fuel sector.
• The Netherlands comes close behind and Dutch investors (in many cases utilising ‘shell’ companies without actual business activity) have initiated more corporate court cases than those of any other European country.
• Ireland has no bilateral investment treaties with other countries (though this could soon change if European Union trade agreements with ISDS start coming into force), and Norway has already cancelled half of its relatively few treaties, showing that it is possible for European countries to choose alternative paths.

ISDS is a provision written into many trade and investment deals. It give companies the power to sue governments in private tribunals outside of national legal systems, over policies such as environmental protection or health regulation that they allege harm their profits – with payouts often reaching the billions.

The report’s authors state that the scorecard demonstrates the outsized role Europe plays in the global ISDS architecture, revealing a highly concentrated system with a small group of countries – the UK, the Netherlands, Germany, France and Switzerland – accounting for a disproportionate share of the treaties, cases and climate risk generated by the ISDS regime.

The report recommends that European governments stop signing new agreements that include ISDS provisions, and begin systematically cancelling existing treaties. Where those treaties have “sunset clauses” that allow treaties’ powers to continue after cancellation for a set period, often 10 – 20 years, countries should pursue mutual agreements to neutralise them. The report also urges governments to engage collectively with other countries, including outside of Europe, to support further potential for stepping away from ISDS.

The treaty networks are described as “rooted in post-colonial economic relationships”, with the consequences felt particularly acutely by Global South countries that are subject to the majority of ISDS claims. 

However, European countries have been increasingly hit with cases themselves, especially over their climate policies. The EU, Germany and Denmark face a case brought by a US investor over the impact of the windfall profits tax introduced to protect consumers in 2022. Recently, the UK was sued by investors in the Cumbria coal mine, after it was quashed by the high court over its climate impacts. There has also been a large spike in cases across Europe directly challenging sanctions imposed following the Russian invasion of Ukraine.

Colombia, co-host of the First Conference on Transitioning Away from Fossil Fuels, has just announced its intention to withdraw from ISDS. With the topic of ISDS a central item on the conference agenda, campaigners across Europe are calling on their governments to “seize the opportunity” to plan a coordinated exit from the ISDS regime with other countries in attendance.

ENDS

For more information and interviews:

Jani Savolainen, jani.savolainen@caneurope.org

Notes to editor

1. The report is jointly published by CAN Europe, Global Justice Now (UK), PowerShift (Germany), the European Trade Justice Coalition, the Veblen Institute (France), and Alliance Sud (Switzerland). 
2. The Scorecard ranks 30 European countries – the 27 EU member states plus Norway, Switzerland, and the United Kingdom – by their structural involvement in the ISDS system. It adopts the home state perspective by examining which countries’ treaty networks and corporate actors are driving the system as sources of ISDS claims. Ten indicators capture different dimensions of this involvement, from the size of a country’s active ISDS treaty network to the number and financial scale of cases its investors have brought, and the fossil fuel investments those treaties cover. The raw values were normalised, weighted to a composite score, and transformed to a 0-10 scale, where higher scores indicate greater involvement in the ISDS system. Full methodology available upon request.