Inside Climate News reports:

The Biden administration announced a last-minute deal on trade this week, reaching an agreement with Colombia to limit protections for investors between the two countries. The move represents a small step toward reforming a system that has awarded multinational corporations more than $100 billion in taxpayer funds from countries around the globe.

Investor state dispute settlement, or ISDS, allows foreign companies to bypass national courts and sue governments before panels of arbitrators if they believe their rights have been violated. The system is built into thousands of treaties and contracts, and companies have used it to win hundreds of millions or even billions of dollars after governments have hiked taxes, implemented new regulations or rejected licenses for mining and oil and gas drilling.

The agreement, announced Thursday, comes in the wake of a multi-part Inside Climate News investigation that uncovered how companies have used ISDS to force big payouts from governments, even in cases where they have left behind pollution or been accused of violating human rights. The vast majority of claims are brought by foreign companies from wealthy nations against developing countries, and increasingly, Wall Street firms have been financing those claims for a cut of the awards.

The ISDS system has faced growing scrutiny from government officials, lawyers and human rights and climate advocates in recent years. They argue it prioritizes corporate profits over public interests and poses a threat to climate action by punishing countries that act to limit fossil fuels. A growing number of nations, including Bolivia, Indonesia, Italy, South Africa and Spain, have taken steps to exit the system or limit their exposure.

The agreement between U.S. Trade Representative Katherine Tai and Colombia Trade Minister Luis Carlos Reyes took the form of a “binding” interpretation of the U.S.-Colombia Trade Promotion Agreement, which took effect in 2012. The new agreement seeks to limit the types of arbitration claims that companies from each nation can seek and the amount of damages they can claim. In particular, it aims to cut off companies’ ability to base claims solely on speculative “future lost profits,” which has helped send the average award size soaring to $256 million from 2014-2023, according to United Nations data.

As of the close of 2023, one in 20 ISDS cases won by investors resulted in an award of $1 billion or more. [Continue reading…]