Colombia Leads Global South Countries' Exit From ISDS

As part of an international campaign that public service unions have been pushing, along with other organisations, for Colombia to take a leading role in the exit of countries in the Global South from the international investment arbitration system, the president of Colombia, Gustavo Petro, has announced that the country will exit the regime, arguing that the tribunals end up resolving disputes in favour of private parties.

Not coincidentally, a day before Petro's announcement on Wednesday 25 March, PSI members participated in Bogotá in the event "Investment Arbitration and the Just Energy Transition", organised by the Center for Economic and Policy Research (CEPR). The event brought together academics, civil society organisations and state representatives to discuss the profoundly negative impacts of bilateral investment treaties and investor-state dispute settlement (ISDS) mechanisms, which subordinate countries to international arbitration tribunals.

30% of the claims against Latin American states relate to public services...

Under this regime, foreign investors - and even large domestic investors channelling their capital through tax havens - can sue states when they adopt policies on economic development, environmental protection, strengthening public services or social protection that affect their profits. In his announcement, Petro stressed that "several countries have already announced or finalised their exit from this type of arbitration, including the United States".

In a letter sent to President Petro, PSI General Secretary Daniel Bertossa said: "This decision is an important step in strengthening the public policy space of states and in promoting equitable development models.

Bertossa stressed the importance of Colombia withdrawing from the International Centre for Settlement of Investment Disputes (ICSID) and denouncing Bilateral Investment Treaties and Free Trade Agreements that contain ISDS clauses detrimental to workers and public services. "PSI has consistently argued the importance of protecting public services from privatisation processes and undue influence by corporate actors," he added.

Event in Bogotá

During the event held at the Universidad del Rosario in Bogotá, Oscar Parra, PSI's economic justice coordinator and PSI representative among the panellists, highlighted that nearly 30% of arbitration claims against Latin American states are related to public services, and that approximately 86% of the claims come from US and European companies. In this sense, he pointed out that the privatisation of public services, the financialisation of the economy and bilateral investment treaties are all part of the same project of commodification of public goods in favour of private profit.

... and 86% come from US and European companies.

Johana Cortés-Nieto, professor at the Faculty of Jurisprudence at the Universidad del Rosario, explained that this legal architecture ends up granting investors the status of vulnerable actors, while states lose sovereignty and the capacity to implement public policies. In practice, property rights are expanded over human, environmental and social rights, and also over public goods.

It was also highlighted that a large part of arbitration claims come from mining and fossil fuel companies, which means that ending ISDS is a prerequisite for any just ecological transition process. In addition, Latin American countries spend hundreds of millions of dollars, and in many cases billions of dollars, every year on compensation and legal costs in international arbitration disputes. Public resources that should be spent on public services, social rights and infrastructure.

Panellists pointed out that the alternative is to establish investment contracts under national law, where investors have rights but also obligations, such as technology transfer and local and national development mechanisms, something that in most cases is explicitly prohibited in bilateral investment treaties.

Both the US and European countries continue to promote for the countries of the Global South the same clauses that they reject for themselves.

Experiences were discussed, such as that of Ecuador, which withdrew from the arbitration system without suffering a drop in foreign investment - on the contrary, investment has increased - and the case of Brazil, which never submitted to this system and has maintained its sovereignty in its investment contracts. It was also mentioned that several European countries decided to withdraw from the Energy Charter Treaty because it allows energy companies to sue states in international arbitration tribunals when they adopt climate or environmental policies that affect their profits, which limits the regulatory sovereignty of states and hinders the energy transition.

The same is true for the US in its trade agreement with Canada, where ISDS clauses have been rejected by both Democrats and Republicans. However, both the US and European countries continue to promote for the countries of the Global South the same clauses that they reject for themselves.

The debate made it clear that the international investment arbitration system represents an enormous cost to states and a limitation on democracy and economic sovereignty. For this reason, we continue to fight for the countries of the Global South to move forward to exit this unjust and asymmetrical international system, and to recover the sovereignty of states in the face of multinationals and large international investors.

PSI welcomes Colombia's initiative to announce its exit and calls on other countries to do the same.