The International Investment Legal Regime, Climate Change, and Human Rights: An Overview

This briefing examines how the Investor-State Dispute Settlement (ISDS) system hinders climate action and human rights by allowing corporations, particularly in the fossil fuel sector, to sue governments over environmental regulations. It highlights the 'regulatory chill' effect, the inadequacy of current reforms like the Energy Charter Treaty withdrawals, and the significance of 2025 advisory opinions from the ICJ and Inter-American Court of Human Rights which affirm state duties to reduce emissions regardless of prior investment licenses.

• The Investor-State Dispute Settlement (ISDS) system allows foreign investors to bypass national courts and sue states before supranational panels of three arbitrators when state actions, including climate policies or human rights protections, allegedly harm their investments. These proceedings are costly, lack a system of appeal or precedent, and can result in awards reaching billions of dollars.
• ISDS awards have seen a significant increase in value, rising from an average of $25 million between 1994 and 2003 to over $250 million between 2014 and 2023. Most claimants are based in high-income countries, while the majority of claims are filed against middle-income countries.
• The fossil fuel industry is a primary user of ISDS, with these companies bringing an estimated 20% of all cases and receiving awards exceeding $80 billion. Within fossil fuel-related arbitrations, the oil and gas industry accounts for 92% of cases.
• The threat of expensive ISDS claims creates a 'regulatory chill,' where governments are deterred from implementing environmental, labor, or human rights policies. For instance, New Zealand reportedly joined the Beyond Oil and Gas Alliance (BOGA) as an associate member rather than a core member to avoid potential conflicts with investor-state settlements regarding the end of new oil and gas concessions.
• Recent reform efforts have been described as piecemeal and insufficient. While the EU and UK announced withdrawals from the Energy Charter Treaty (ECT) in 2024, a 'sunset clause' continues to protect foreign fossil fuel investments in those regions for twenty years. Furthermore, a modernized ECT text approved on December 3, 2024, is criticized for having a carve-out timeline that is too long and excluding key fossil fuel infrastructure.
• In July 2025, the International Court of Justice (ICJ) and the Inter-American Court of Human Rights issued advisory opinions affirming that states have legal duties to regulate polluting conduct and reduce greenhouse gas emissions. The ICJ noted that states may need to revoke administrative measures, such as fossil fuel licenses, to comply with these duties, while the Inter-American Court stated that investment treaty designs are often inconsistent with climate obligations.

APA

Reisch, N., Mingrone, F., & Sky, M. B. (2025). The International Investment Legal Regime, Climate Change, and Human Rights: An Overview. Center for International Environmental Law. https://www.ciel.org/wp-content/uploads/2025/10/International_Investment_Legal_Regime_Climate_Change_and_Human_Rights_An_Overview.pdf

Chicago

Reisch, Nikki, Francesca Mingrone, and Melissa Blue Sky. The International Investment Legal Regime, Climate Change, and Human Rights: An Overview. Center for International Environmental Law, 2025. https://www.ciel.org/wp-content/uploads/2025/10/International_Investment_Legal_Regime_Climate_Change_and_Human_Rights_An_Overview.pdf.

Wikipedia

{{cite report |last1=Reisch |first1=Nikki |last2=Mingrone |first2=Francesca |last3=Sky |first3=Melissa Blue |title=The International Investment Legal Regime, Climate Change, and Human Rights: An Overview |publisher=Center for International Environmental Law |date=October 2025 |url=https://www.ciel.org/wp-content/uploads/2025/10/International_Investment_Legal_Regime_Climate_Change_and_Human_Rights_An_Overview.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{reisch2025international, author = {Reisch, Nikki and Mingrone, Francesca and Sky, Melissa Blue}, title = {{The International Investment Legal Regime, Climate Change, and Human Rights: An Overview}}, institution = {Center for International Environmental Law}, year = {2025}, month = oct, url = {https://www.ciel.org/wp-content/uploads/2025/10/International_Investment_Legal_Regime_Climate_Change_and_Human_Rights_An_Overview.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }