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In the legal world, we often see ourselves as defenders of justice, but a recent UN report challenges this perception. The report, authored by David R. Boyd, the UN special rapporteur on human rights obligations related to a safe and sustainable environment, sheds light on the controversial realm of investor-state dispute settlement (ISDS) schemes.

ISDS, initially created to shield investors from expropriation by newly independent states, has transformed into a tool where foreign investors leverage international arbitration to contest climate and environmental actions by nations. Boyd’s report highlights cases such as Tethyan Copper Company v Pakistan, where the Pakistani government’s refusal to approve a mine resulted in a staggering $11 billion compensation order, dwarfing the aid received after climate-related floods.

The notorious Nigeria v P&ID case, previously ranked among the largest ISDS awards, is also mentioned. The report underscores the routine occurrence of billion-dollar ISDS claims in climate and environmental disputes, posing economic challenges for low- and middle-income nations.

Boyd’s critique extends to the role of lawyers in ISDS, emphasizing their substantial influence in its development. The report notes that cases are predominantly decided by arbitration lawyers, often perceived to have conflicts of interest or pro-investor biases. The lack of diversity among arbitrators, coupled with revolving doors and ‘double hatting,’ raises concerns about the fairness of adjudication. Most strikingly, arbitrators often lack expertise in human rights and environmental law.

source: Weaponising international arbitration | Opinion | Law Gazette

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