RED CARPET COURTS

The report examines the systemic injustices of the investor-state dispute settlement (ISDS) regime, using ten case studies to demonstrate how corporations use international arbitration to bypass domestic courts and challenge public interest laws. It highlights the 'regulatory chill' effect, where the threat of multi-billion dollar lawsuits deters governments from implementing climate, health, and environmental protections. The document specifically criticises the European Union's proposed reforms, arguing that the Investment Court System (ICS) and the Multilateral Investment Court maintain the same substantive investor privileges that allow corporations to claim compensation for lost future profits and ignore human rights obligations.

• The ISDS system allows corporations to bypass domestic courts and sue governments in international tribunals, often resulting in massive financial payouts from public budgets. As of January 1, 2019, 942 disputes against 117 countries were recorded, with investors suing for a total of US$623 billion in known cases.
• ISDS is used to create a 'regulatory chill,' where the mere threat of expensive arbitration intimidates governments into delaying, changing, or abandoning public interest legislation. For example, the Canadian oil and gas company Vermilion threatened France with ISDS under the Energy Charter Treaty, which the report suggests led to the watering down of a law intended to end fossil fuel extraction by 2040.
• The system frequently rewards investors even when they have committed human rights abuses or violated national laws. In the Copper Mesa vs Ecuador case, arbitrators ordered Ecuador to pay US$24 million despite finding that the company engaged in a "reckless escalation of violence" involving armed men firing weapons at villagers.
• ISDS tribunals often ignore the rights of indigenous peoples and the impact of their rulings on local communities. In the Border Timbers and von Pezold vs Zimbabwe case, arbitrators ordered the restitution of land to European investors, which threatened the eviction of over 6,000 indigenous families, while asserting that international human rights law had no relevance to the dispute.
• Corporations use ISDS to challenge the ability of states to collect taxes on capital gains. In Vietnam, ConocoPhillips and Perenco sued the government to avoid paying an estimated US$179 million in capital gains tax following the sale of oil fields.
• The report argues that the European Union's proposed reforms—the Investment Court System (ICS) and the Multilateral Investment Court—are superficial and do not address the core imbalances of ISDS. These systems still protect the same substantive rights, such as "fair and equitable treatment," and allow investors to claim compensation for lost future profits.
• Third-party funding (TPF) by hedge funds and insurance companies encourages speculative lawsuits by removing financial risk for corporations. The report notes that funders like Tenor Capital and Burford Capital profit by taking a significant cut of the final awards, which increases the litigious pressure on constrained states.
• There is little evidence that investment treaties and ISDS actually increase Foreign Direct Investment (FDI). The report cites Brazil as a counter-example, noting it receives the largest amount of FDI in Latin America despite not having ratified a treaty allowing for ISDS.

APA

Verheecke, L., Eberhardt, P., Olivet, C., & Cossar-Gilbert, S. (2019). RED CARPET COURTS. Friends of the Earth International. https://www.foei.org/wp-content/uploads/2020/12/foe-red-carpet-courts-FINAL-WEB.pdf

Chicago

Verheecke, Lora, Pia Eberhardt, Cecilia Olivet, and Sam Cossar-Gilbert. RED CARPET COURTS. Friends of the Earth International, 2019. https://www.foei.org/wp-content/uploads/2020/12/foe-red-carpet-courts-FINAL-WEB.pdf.

Wikipedia

{{cite report |last1=Verheecke |first1=Lora |last2=Eberhardt |first2=Pia |last3=Olivet |first3=Cecilia |last4=Cossar-Gilbert |first4=Sam |title=RED CARPET COURTS |publisher=Friends of the Earth International |date=June 2019 |url=https://www.foei.org/wp-content/uploads/2020/12/foe-red-carpet-courts-FINAL-WEB.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{verheecke2019red, author = {Verheecke, Lora and Eberhardt, Pia and Olivet, Cecilia and Cossar-Gilbert, Sam}, title = {{RED CARPET COURTS}}, institution = {Friends of the Earth International}, year = {2019}, month = jun, url = {https://www.foei.org/wp-content/uploads/2020/12/foe-red-carpet-courts-FINAL-WEB.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }