This report was authored by Iza Camarillo. Special thanks to Melinda St. Louis and Melanie Foley for overseeing this project, and Matthew McCarty for his legal research contributions.
I extend my sincere gratitude to Carla García-Zendejas, Helionor de Anzizu, and Melissa Blue Sky from the Center for International Environmental Law (CIEL) for reviewing the report, providing invaluable feedback, and their remarkable efforts in amplifying Indigenous Peoples’ and community voices in ISDS proceedings.
Finally, I am profoundly appreciative of my colleague Sarah Stevens for their unwavering support, encouragement, and wealth of knowledge on ISDS and the rest of the Global Trade Watch team, Andi Petrovic, Rishab Bailey, Ryan Harvey, and Sarah Grace Spurgin for their dedication to global trade advocacy.
This report is dedicated to the Indigenous peoples who bravely defend their land, territory, and way of life in the face of threats, violence, and criminalization by oppressive forces and corporate greed.
Prior to joining Public Citizen’s Global Trade Watch as Research Director and advocate, I represented Latin American governments in ISDS arbitration. My time as an ISDS defense attorney exposed me to the plight of Indigenous peoples in these proceedings and their unique challenges and obstructions to justice. Despite “winning” notable cases, the governments sued were still forced to line the pockets of greedy foreign investors with millions of taxpayer dollars at the expense of their citizens.
Consequently, the damage caused to Indigenous peoples and their territories was irreparable. Yet, the secretive nature of ISDS meant the world remained largely unaware, while the system continued the usual cycle of more cases and egregious awards for corporations, the affected communities suffered lasting scars with limited recourse to justice.
This experience led me to conclude that meaningful change requires moving away from ISDS and amplifying the voices that the system has long silenced and marginalized.
Hundreds of members of the Waorani nation march through Puyo, Ecuador after winning a historic 2019 court case protecting their ancestral lands from oil drilling. (Jeronimo Zuñiga/Amazon Frontlines)
This report presents a critical examination of the enduring marginalization and vulnerability of Indigenous peoples1 and local communities in Latin America, tracing its roots to centuries of colonial exploitation and its perpetuation through the Investor-State Dispute Settlement (ISDS) system.
Under colonialism by the Spanish crown, Indigenous peoples in Latin America were subjected to violence, exploitation, and diseases brought from Europe, causing a catastrophic loss of life and culture.2 Furthermore, colonialism brutally imposed forced labor to extract vast wealth from the region, primarily in the form of precious metals like gold and silver.3
The extractive industries established during this era continue to shape the economic disparities within Latin American nations and contribute to issues of inequality and underdevelopment.
The indelible scars of Spanish colonialism continue to mar Latin America.4 Large corporate interests based in former colonial powers feared that newly independent states would nationalize or expropriate foreign investments as they sought to reclaim their natural resources and key industries.
As a result, Western nations established the ISDS system — predominantly characterized by arbitration proceedings aimed at resolving disputes between foreign investors and host states under the auspices of international law — and convinced former colonies that including ISDS provisions in trade and investment agreements was essential to attract foreign direct investment (FDI).
In the post-colonial era, ISDS has continued the legacy of injustice, particularly impacting Indigenous peoples by favoring foreign corporations at the expense of Indigenous lands and resources, mirroring colonial power dynamics. ISDS acts as an extension of colonialism, prioritizing influential nations and corporations over the sovereignty and development of post-colonial Latin American states.
Furthermore, ISDS harms the environment in numerous ways, including by serving as a tool for corporations that pollute countries to demand payment from governments regulating public health and the environment, causing the taxpayers to suffer from pollution and the deviation of public funds to lining corporations’ pockets.
Latin America faces a disproportionate number of ISDS treaty-based disputes, with 360 out of 1,303 (over one-fourth) of known global cases, despite being home to less than 10 percent of the world’s population.5 Latin American governments have been ordered to pay over USD 33.2 billion in taxpayer money by ISDS tribunals, diverting critical resources away from social needs.
Indigenous Peoples’ Rights in International Law
The recognition of Indigenous rights achieved a significant victory through international instruments like the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the International Labour Organization’s (ILO) Convention No. 169 concerning Indigenous and Tribal Peoples.6
In addition to numerous substantive rights, these international instruments enshrined a set of participatory rights designed to structure the interaction between state decision-making bodies and Indigenous communities in ways that require governments and investors to attend to Indigenous perspectives in pursuing their objectives.7
The right to Free, Prior, and Informed Consent (FPIC) is a cornerstone of Indigenous rights. It recognizes their inherent authority to agree to or reject proposals that may impact their lands, resources, or territories. This right underscores the sovereignty and self-determination of Indigenous communities, acknowledging them as primary stakeholders and authorities in matters affecting their people and environment.8
The Conflict of ISDS and Indigenous Peoples’ Rights
The ISDS system, designed to safeguard foreign investors and ensure the stability of international investments, often puts Latin American governments in precarious situations, especially when ISDS cases intersect with Indigenous peoples’ rights.
ISDS Amounts to Corporate Colonialism
ISDS Marginalizes Indigenous Voices
Fuels Social Unrest: The intersection of foreign investments with Indigenous land rights, sovereignty, and environmental concerns, coupled with repeated violations of Indigenous rights, has frequently led to social unrest and protests within Indigenous communities. These communities often ally with activists and civil society organizations to strengthen their advocacy against projects that infringe upon their rights, leading to significant protests and campaigns.20
A stark example of such conflict is the case of South American Silver Limited v. Bolivia, where a Bermuda-based mining company faced accusations from Indigenous communities of polluting sacred lands and committing violent abuses, including sexual assaults.21 The ensuing violent clashes prompted Bolivia to revoke the mining concessions to mitigate the unrest.22
Despite the company’s failure to positively engage with or even recognize the Indigenous communities, it pursued an ISDS claim and was awarded USD 18.7 million by the tribunal.23
Policy Recommendations
Avenues for Governments to Remove ISDS from Existing Agreements:
Unilateral Termination of Bilateral Investment Treaties
Amending Free Trade Agreements to Remove ISDS
Multilateral Termination
Termination by Mutual Consent
Interim Measures to Safeguard Indigenous People:
Comprehensive Reviews of Existing Treaties
Incorporating Indigenous Peoples Rights in Investment Agreements
Facilitating Direct Indigenous Peoples Participation in ISDS
In summary, the historical and contemporary challenges faced by Indigenous communities in Latin America underline the profound effects of colonial legacies and the modern exacerbations perpetuated by the ISDS system. The echoes of colonial exploitation through the ISDS framework continue to disadvantage Indigenous populations, reinforcing old hierarchies by prioritizing foreign investment over indigenous rights and environmental sustainability.
The documented cases and the staggering sums involved in ISDS disputes highlight an urgent need for a reassessment of international investment agreements, emphasizing the importance of aligning them with the fundamental rights of Indigenous peoples and the ecological imperatives of our times.
The Torture of Cuauhtémoc, by Leandro Izaguirre (1892). Cuauhtémoc was the last Aztec ruler, and the conquistadors tortured him to find out where the remaining deposits of gold in the city of Tenochtitlan were located. (National Museum of Art, Mexico City)
Spanish Conquest and Revolutions
In the Latin American region, spanning territories in North, Central, and South America and the Caribbean, many Indigenous civilizations thrived for centuries before European conquest began.25 Sponsored by the Spanish Crown, Christopher Columbus arrived in the Caribbean islands in 1492, kicking off a series of voyages that led to the exploration and eventual conquest of vast territories by European powers.26
Spain sought territorial control by establishing new colonies and forcing its culture, language, and religion on the native population. The Catholic missions were instrumental in this cultural imposition, leading to the erosion of Indigenous languages, belief systems, and traditions.27
To subjugate the population, Indigenous peoples were subjected to violence, exploitation, and diseases brought by the colonizers, causing a catastrophic loss of life and culture.28 The near annihilation of Indigenous peoples and the erasure of their histories and languages remain profound and painful legacies of colonialism in Latin America.29
Furthermore, colonialism extracted vast wealth from the region, primarily in the form of precious metals like gold and silver.30 The conquistadors often seized these resources through brutal methods and shipped them to Europe, enriching colonial powers while impoverishing the colonies.31 The extractive industries established during this era continue to shape the economic disparities within Latin American nations and contribute to issues of inequality and underdevelopment.
After nearly three centuries of Spanish rule, the colonies of Latin America gained their independence in the early 19th century, as internal and external factors spurred the struggle for freedom. Internally, there was growing discontent among Indigenous peoples and mestizos (people of mixed European and Indigenous parentage), who were often sidelined from political power and economic benefits by the Spanish-born ‘elite.’32
Externally, the weakening of Spain’s global dominance, particularly following the Napoleonic Wars in Europe, created an opportune moment for revolutionary movements.33
The Emergence of the United States in Latin America
The wars of independence, which spanned from the early 1800s to around 1825, were marked by political and military struggles as the residents of the Spanish colonies fought to overthrow the Spanish military. Ultimately, Spain retreated, and with the exception of Cuba and Puerto Rico,34 the former colonies gained independence, forming sovereign nations.35
However, the post-independence period was far from stable as the newly formed nations grappled with defining their identities and constructing functional political systems. The power vacuum left by Spain led to internal conflicts and power struggles as various factions vied for control, and a new external power saw an opportunity to engage with these fledgling nations: the United States.36
In the 19th century, the United States asserted its dominance in the Western Hemisphere through key events such as the Monroe Doctrine of 1828 and the Mexican-American War in 1846. The Monroe Doctrine declared the region off-limits to further European colonization, positioning the U.S. as the protector of Latin American sovereignty.37
This assertion of influence paved the way for American economic involvement, particularly in cash crop cultivation, at the expense of European competitors.38 The Mexican-American War saw the U.S. expand significantly, acquiring approximately 55 percent of Mexico’s territories, including California, Utah, Nevada, parts of Arizona, New Mexico, Colorado, and Wyoming. This expansion deeply impacted Mexico, causing political divisions and economic hardships due to losing a significant portion of its revenue-generating territories.39
Subsequently, the Spanish-American War of 1898 solidified the U.S. as a major global player, resulting in the acquisition of territories like Puerto Rico and the Philippines while pushing European powers out.40
This marked a shift in power dynamics, with the U.S. asserting its dominance in Latin America and intervening militarily to protect its interests, exemplified by the construction of the Panama Canal for strategic naval purposes that led to significant impacts on trade and transportation in the region.41
Banana Republics
Privately, American corporations began expanding their reach in Latin America as well. In the late 19th and early 20th centuries, the advent of the United Fruit Company and Standard Fruit Company in Latin America marked the beginning of a new era of economic imperialism, reminiscent of the colonial rule of European powers. These American corporations embarked on an expansive venture that promised infrastructural development and employment opportunities through the construction of railroads and ports.42
However, this development was a double-edged sword, as it came with conditions that entrenched the companies’ monopolistic control over the economies and political systems of host countries, including Colombia, Costa Rica, Ecuador, Guatemala, Honduras, and Nicaragua.43 This pervasive influence led to the coining of the term “banana republics,” highlighting the transformation of sovereign nations into entities primarily serving foreign corporate interests, often at the expense of their own development and autonomy.
The exploitation of these countries was multifaceted, extending beyond economic dominance to political manipulation and significant social and labor unrest. The companies became notorious for their vast landholdings, which were used not just for agricultural production but also as a means of political leverage, making them the largest employers and landowners in their respective regions.44
This corporate overreach was met with significant resistance, exemplified by the 1934 Great Banana Strike in Costa Rica and the General Strike of 1954 in Honduras, as workers protested against unfair labor practices and demanded better conditions.45 The companies’ operations were marked by unethical practices, including bribery, worker exploitation, tax evasion, and environmental degradation, further intertwining their interests with American foreign policy through connections with influential political figures such as John Foster Dulles, who served as United States Secretary of State under President Dwight D. Eisenhower from 1953 to 1959 and his brother, Allen Dulles, who served as the head of the Central Intelligence Agency (CIA) from 1953 to 1961.46
The harms caused by these corporations were extensive, resulting in economic dependency, environmental damage, and a suppression of labor rights within the host countries. Their monopolistic practices not only stifled economic diversity and development but also discouraged local governments from pursuing infrastructure improvements that could have diminished the companies’ control.47
The environmental impact was particularly devastating, with widespread deforestation and chemical pollution affecting the region’s biodiversity and public health.48 Moreover, the political interference by these corporations supported undemocratic regimes and contributed to political instability, most notably through the CIA-backed coup in Guatemala in 1954, which served to protect United Fruit’s interests.49
The downfall of these banana republics was precipitated by a combination of internal resistance and external pressure. Labor movements and strikes brought about greater awareness of workers’ rights and led to the strengthening of labor unions, challenging the companies’ exploitative practices.50 Growing awareness and activism around human rights and environmental issues brought international scrutiny, while legal challenges, including antitrust investigations in the United States, aimed to dismantle their monopolies.51 Additionally, the Cold War’s geopolitical dynamics saw the Soviet Union supporting nationalist movements in Latin America, opposing American corporate interests in the region.52 This period also witnessed a strategic shift in U.S. foreign policy towards promoting human rights and democracy, further isolating the corporations53 .
By the late 20th century, the traditional model of the banana republic had significantly declined. Countries began to assert control over their resources and industries, redistributing land and breaking up foreign monopolies.54 Despite this, the legacy of exploitation and intervention by these fruit companies has left deep and lasting impacts on the region’s development, political landscape, and labor rights movements. The companies continue to thrive as present-day Chiquita and Dole, respectively.55
Institutionalized Neo-Colonialism: “Protecting Foreign Investment”
FDI was championed by countries from the Global North and various international bodies as a key mechanism for delivering essential capital required for building infrastructure, fostering industrialization, and stimulating overall economic development in countries of the Global South.57
However, attracting FDI often involved signing trade and investment agreements that, in hindsight, were not always favorable. Former colonies faced economic vulnerability, lacked expertise in negotiating complex international agreements, and encountered internal political pressure to stabilize and grow their economies.58
Meanwhile, large corporate interests based in former colonial powers feared that newly independent states would nationalize or expropriate foreign investments as they sought to reclaim their natural resources and key industries. As a result, in the 1960s, Western nations established the Investor-State Dispute Settlement (ISDS) system59 — predominantly characterized by arbitration proceedings aimed at resolving disputes between foreign investors and host states under the auspices of international law — and convinced former colonies that including ISDS provisions in trade and investment agreements was essential to attract FDI.60
Thus, ISDS provisions became standard components of Bilateral Investment Treaties (BITs) and the investment chapters of Free Trade Agreements (FTAs). In some instances, ISDS provisions were incorporated directly into contracts between investors and host governments, a practice that continues today.
In ISDS arbitration proceedings, corporations bypass domestic courts and only have to convince a closed-door panel, often consisting of three corporate lawyers, that the host state’s actions violated a breach of the international agreement or contract.61
In this one-way system, governments are not able to sue corporations for wrongdoings through ISDS.62 In fact, there are few avenues available for states to hold multinational corporations accountable. Even within the Inter-American human rights system, often regarded as the forefront in recognizing and enforcing Indigenous rights norms, cases are prone to delays due to the overwhelming influx of claims and limited resources.63
Paradoxically, despite arguments by ISDS proponents that the system encourages FDI, studies do not provide any supporting evidence.64 Instead, studies show that countries with ISDS provisions in their investment agreements have not experienced substantial increases in FDI.65 In contrast, Brazil, which does not have such provisions, remains among the top ten FDI destinations globally, without the restraints of ISDS on their ability to implement laws and regulations that suit their nation’s needs.66
ISDS empowers corporations with the unprecedented right to challenge host states if they believe a change in law or regulation would adversely affect their current or projected future profits, even if that change is in the public interest.67 Governments have incurred billions in compensatory payments to foreign corporations. These payments, borne by taxpayers, are often the result of simply putting in place sound public policy.68
As a result, ISDS is a major obstacle to countries addressing environmental harms since foreign investors use it to seek compensation for taking action to protect the environment. Even when corporations pollute the environment, arbitral tribunals force governments to pay polluters instead of making them pay for their activities and the impacts they have on biodiversity and livelihoods in the countries where they operate.
Since 2009, there have been 21 ISDS cases launched against governments around the world in response to climate actions, causing many of the regulatory measures to be abandoned and taxpayers to pay billions in awards to fossil fuel and mining companies on top of having to live with the environmental degradation they caused.69
Metalclad v. Mexico
[ISDS CASE FILES]
Metalclad v. Mexico is one of the earliest and most notorious ISDS cases involving a Latin American country. In 1997, Metalclad Corporation, a U.S. waste management firm, claimed that a Mexican municipality’s denial of permits to operate a toxic waste facility amid concerns of water contamination and other environmental and health hazards violated its rights under the North American Free Trade Agreement (NAFTA).70
The Guadalcazar toxic waste facility. (Unknown)
The tribunal sided with the corporation and ordered Mexico to pay over USD 16.6 million.73 This case drew attention to the potential implications of ISDS for host governments’ regulatory authority and their ability to implement environmental policies.74
Expropriation is legally defined as the action by the state or an authority of taking property from its owner for public use or benefit. Governments most often expropriate properties to build highways, railroads, airports, or other infrastructure projects. However, in ISDS, the definition of expropriation is broadened to allow corporations to sue governments for “indirect expropriation” of their investment but there is no widely accepted definition of it. As such, arbitration tribunals have often interpreted it as any government action that could potentially affect a corporation’s future profits.75
Bullseye on Latin America
These disputes have led to substantial financial liabilities, ultimately borne by taxpayers. To date, ISDS tribunals have ordered Latin American governments to pay over USD 32.5 billion in known award and settlement compensations.77 However, the sum is likely much higher due to the secretive nature of ISDS proceedings and the option to leave award amounts undisclosed to the public. At present, Latin American governments are being sued for tens of billions more in pending cases.78 According to the United Nations Conference on
Arbitration proceedings can be costly and lengthy, often taking years to resolve and requiring significant financial resources, substantially burdening countries, especially small and developing nations, diverting funds from essential public services.81 Furthermore, because tribunals can order unlimited amounts of “damages” if they determine the state violated the broad investor rights, some ISDS rulings have resulted in enormous payouts by cash-strapped governments to wealthy investors.82
Several factors contribute to the prevalence of ISDS claims in this region:
Natural Resources
Colonial Legacy
Legal and Regulatory Changes
CMS Gas v. Argentina
[ISDS CASE FILES]
For example, Argentina faced a slew of ISDS cases in the aftermath of its financial crisis in the early 2000s as it implemented measures to stabilize its economy when more than half of its population plunged below the poverty line.89
Unrest From Argentina’s 2001 to 2002 Economic, Financial And Social Crisis. (Pablo Cuarterolo)
In CMS Gas v. Argentina, a U.S. energy company launched an ISDS case in response to Argentina passing emergency measures to mitigate the financial crisis, including freezing utility rates and converting dollar-denominated tariffs into pesos.90
Despite Argentina’s government arguing that the measures were necessary and justified under the BIT’s economic emergency provisions,91 the tribunal sided with the corporation and ordered Argentina to pay USD 133.2 million plus interest.92
Political Instability and Corruption
Infinito Gold v. Costa Rica
[ISDS CASE FILES]
In 2014, Canadian mining firm Infinito Gold sued Costa Rica for USD 94 million after domestic courts upheld the unanimous legislative action to ban open-pit mining due to environmental concerns,94 even though the process through which they obtained their original license was so corrupt it resulted in a criminal investigation of the then-President.95
The local communities protested the use of open-pit metallic mining in the tropical rainforests and the damage caused to the different species and water sources at the site of industrial activity.96
Demonstrations against the Crucitas mining project in Costa Rica. (Bilaterals.org)
Police attack crowds in Buenos Aires during the 2001 Argentinian financial collapse. (Walter Astrada/AP)
The Chilling Effect on Protective Measures
The mere threat of launching an ISDS case can have severe and far-reaching consequences for host states. One of the most palpable impacts is the deterrence of regulation, known as regulatory chill. Wary of the financial and legal ramifications, governments may become reluctant to enact policies essential for public health, safety, and environmental conservation.97
This dynamic can lead to a regulatory environment that shields corporate interests and prevents the enactment of policies necessary for Indigenous peoples and public welfare.
The threat of ISDS disputes can lead governments to not just temporarily pause but potentially dilute or completely abandon critical regulations. Anticipating potential ISDS claims, governments may redirect human and financial capital toward legal preparations, consultations, and negotiations, a reallocation at the expense of pressing public needs, especially in sectors like healthcare, environmental protection, and infrastructure.98
The chilling effect thus creates a barrier, as governments must weigh the imperative to safeguard public interest against the looming threat of legal disputes with foreign investors.99
Uber v. Colombia
[ISDS CASE FILES]
The case of Uber v. Colombia provides an example of regulatory chill. In 2019, Colombia sought to regulate the operation of the U.S.-based ride-sharing app Uber within its territory.100
This regulation was aimed at ensuring fair competition with traditional taxi services and compliance with local transportation laws following protests from taxi drivers claiming Uber had an unfair advantage since they did not pay the same licensing fees traditional cabs are subject to.101
Taxi Drivers protest Uber in Colombia’s capital of Bogota, 2017. (Raul Arboleda/AFP/ Getty Images)
A Colombian judge ruled that Uber failed to operate within the country’s laws and rules, and the regulatory agency for commerce and trade ordered Uber to cease operations.102
In response, Uber issued a letter to Colombia’s president, threatening to initiate an ISDS claim under the U.S.-Colombia Trade Promotion Agreement, arguing that the Colombian government’s actions were unfairly targeting the company and adversely affecting its investments,103 reportedly seeking upwards of USD 250 million in damages if an agreement was not reached.104
On February 3, 2020, the threatening letter was followed by a notice of dispute, officially registering the case.105 After a brief pause, Uber resumed its activities in Colombia, but the corporation did not withdraw its notice of dispute, allowing it to serve as a lingering reminder of what could happen if the Colombian government suspends its right to operate in the future.106
Philip Morris v. Uruguay
[ISDS CASE FILES]
The Philip Morris v. Uruguay case also created a regulatory chilling effect. In 2010, Philip Morris, a Swiss global tobacco company, launched an ISDS dispute against Uruguay, challenging the country’s anti- smoking laws.107
These laws, which included graphic health warnings on cigarette packages and restrictions on branding, logos, and promotional elements, were part of Uruguay’s public health campaign to reduce smoking rates – one of the highest in Latin America.108
John Oliver covered tobacco companies’ ISDS attacks on public health measures back in 2015.
Philip Morris argued that these measures expropriated its investments and infringed on its intellectual property rights.109 Six years later, only after Michael Bloomberg bankrolled the Uruguayan government’s defense,110 the ISDS tribunal ruled in favor of Uruguay.111
However, the regulatory chill effect spilled over to New Zealand, which had planned on implementing similar measures to protect public health but delayed doing so in fear of Philip Morris launching disputes against them as well.112
Anti-tobacco installation in Montevideo, Uruguay. (Pablo La Rosa/Reuters)
Both cases illustrate the chilling effect of ISDS on domestic regulation. While the outcomes of these disputes can vary, the process itself can be daunting and costly for states, especially for smaller or developing countries with limited resources. The fear of potential ISDS claims can lead governments to exercise caution or restraint in enacting regulations that might provoke litigation, even when such measures are in the public interest.
ISDS is a major obstacle to countries addressing environmental harms since foreign investors use it to seek compensation for taking action to protect the environment. Even when corporations pollute the environment, arbitral tribunals force governments to pay polluters instead of making them pay for their activities and the impacts they have on biodiversity and livelihoods in the countries where they operate.114
Since 2009, there have been 21 ISDS cases launched against governments around the world in response to climate actions, causing many of the regulatory measures to be abandoned and taxpayers to pay billions in awards to fossil fuel and mining companies on top of having to live with the environmental degradation they caused.115
When Uruguay increased the size of its warnings from 50% to 80% of the surface of the pack there existed a considerable body of experimental and survey evidence… suggesting that larger warnings are more legible and noticeable and, therefore, better at informing smokers and non-smokers of risk.
– Written Submission by the World Health Organization and the WTO Framework Convention on Tobacco Control Secretariat.113
States Never Win
Sometimes, ISDS tribunals side with states and dismiss the investor’s claims. However, this is far from a victory. In many cases, governments are still responsible for paying millions of dollars in legal and arbitration fees, wasting the resources spent defending themselves in lawsuits.
Álvarez y Marín and others v. Panama
[ISDS CASE FILES]
In Álvarez y Marín and others v. Panama, a group of Dutch and Costa Rican investors sued Panama over a tourism project in an Indigenous-protected reserve known as Comarca Ngöbe- Buglé. According to the claimants, the project was frustrated due to local opposition and a governmental report.
The Comarca is a special territorial regime in which the Indigenous communities have collective ownership of the lands in the reserve. Therefore, third-party ownership is limited.
Panama argued that the investors illegally acquired the farms in the Comarca area through acquisitive prescription (so-called “squatter’s rights”) proceedings that had produced judgments granting ownership to third parties. It alleged that such proceedings were tainted by fraud and irregularities.
After more than three years, the tribunal sided with Panama but ordered each party to bear its own costs and ordered Panama to bear the onsite inspection costs, resulting in millions of taxpayer dollars spent on the case, once again proving that even when states “win,” they lose.116
Ngoebe-Bugle leaders protest on the Pan-American highway for their rights to have free, prior, and informed consent on mining and hydroelectric projects. (Cultural Survival)
Power Imbalances
ISDS arbitration proceedings are increasingly scrutinized for their lack of transparency and potential bias toward corporate interests. These mechanisms, primarily conducted in international arbitration forums such as the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), reveal a complex web of confidentiality, limited public participation, and legal uncertainty.
The structural and procedural aspects of ISDS arbitration contribute to these challenges, with harmful implications for state sovereignty and marginalized communities, particularly in the Global South.
Occidental Petroleum v. Ecuador
[ISDS CASE FILES]
The Occidental Petroleum v. Ecuador case serves as an example of wrongful corporate actions, highlighting how ISDS enables investors to evade accountability for breaking domestic laws and profit by suing governments.
In 2006, U.S. oil corporation Occidental Petroleum Corporation (Oxy) launched a case against Ecuador under the Ecuador-United States BIT after the government terminated an oil concession due to the company’s breach of contract and breaking Ecuadorian law.118
Demonstrations against the Oxy project. (Rainforest Action Network)
Oxy illegally sold 40 percent of its production rights to another firm without government approval, despite a provision in the concession contract stating that the sale of Oxy’s production rights without government pre-approval would terminate the contract.119
The contract explicitly enforced Ecuador’s hydrocarbons law, which protects the government’s prerogative to vet companies seeking to produce oil in its territory, a particular concern in the environmentally sensitive Amazon region where Oxy was operating.120
Although the ISDS tribunal acknowledged that Oxy had broken the law and the government’s response was lawful, they concocted a new obligation for the government (not included in the BIT) that its response must be “proportional” to the corporation’s violation of the law.121
They determined that Ecuador violated this newly fabricated obligation, ordering Ecuador to pay USD 2.3 billion (including compound interest),122 rendering it one of the highest awards to date.123 The award was later reduced to USD 1.4 billion, still a ludicrous amount for a government to pay an investor for breaking the law.124
Azurix v. Argentina
[ISDS CASE FILES]
Azurix v. Argentina is a case that demonstrates how ISDS allows investors to fail to meet their contractual obligations, endanger the public, and exploit the crises they create. U.S. water company and Enron subsidiary, Azurix Corp., won a concession to provide clean drinking water and sewage treatment to 2.5 million people in Argentina.
Within a few months, residents complained of foul odors coming from the water. Local governments advised against drinking or paying for tap water.125 After identifying the problem as algae contamination of a reservoir, Azurix alleged the algae was the government’s responsibility and claimed it harmed the company by preventing rate increases (increasing their profits while failing to provide potable water).126
Ultimately, the tribunal sided with the investor and ordered the Argentine government to pay USD 165 million plus interest, in addition to covering almost all of the tribunal’s costs.127
TCW v. the Dominican Republic
[ISDS CASE FILES]
In another example, during a nationwide energy crisis in the Dominican Republic, TCW Group — a U.S. investment management corporation that jointly owned with the government one of three electricity distribution firms — claimed that the government violated the Central America- Dominican Republic Free Trade Agreement (CAFTA-DR) by failing to raise electricity rates and prevent electricity theft by poor residents.128
The Dominican Republic’s Punta Catalina power plant. (Unknown)
TCW also argued that the government did not subsidize electricity rates, which would have diminished electricity theft by poor residents, despite such subsidization being impossible for the cash-strapped government still recovering from a banking crisis.129
TCW demanded USD 606 million from the Dominican Republic for the alleged CAFTA-DR violations despite spending just USD 2 million to purchase the business from another U.S. investor.130 The company also admitted to having “not independently committed additional capital” to the electricity distribution firm after its purchase in 2004.131
The government paid TCW USD 26.5 million to drop the case, reasoning that it was cheaper than continuing to pay legal fees.132
Lupaka Gold v. Peru
[ISDS CASE FILES]
Similarly, in Lupaka Gold v. Peru, a Canadian mining company refused to make efforts towards social license from the community to operate a mining project and, when met with resistance from the local communities, deployed extrajudicial force against them and then sued Peru for over USD 100 million over disputes arising from a precious metals mining project.133
The company claimed Peru failed to dissolve the violent invasions and blockades from the surrounding communities that opposed the mining project, destroying their investment.134
Peru responded that the investors not only failed to obtain a social license, but they actively ignored the environmental concerns expressed by the communities over the project and demanded forceful intervention from the government against the Indigenous population.135 The Peruvian government has likely already had to spend millions in legal defense in this ongoing ISDS case.136
Lack of Transparency
ISDS proceedings are often characterized by closed-door arbitration, limiting public accountability and awareness. This confidentiality, intended to protect sensitive commercial information, frequently extends to areas of public interest.
As a result, tribunals make decisions with far-reaching implications for public policy and finances without adequate public insight or input. ICSID, along with other institutions like the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), and ad hoc tribunals in the Permanent Court of Arbitration (PCA), operate under varying procedural norms but share common criticisms regarding transparency.
The lack of transparency in ISDS cases has significant implications for host states, investors, and the public. Host states may face challenges in defending public policy decisions, while investors may exploit the confidential nature of proceedings to their advantage. Affected communities and the general public are often left uninformed and excluded from meaningful participation in disputes that have direct implications for their environment, public resources, and societal well-being.137
Odyssey v. Mexico
[ISDS CASE FILES]
For example, in Odyssey v. Mexico, a U.S. deep-ocean mining company sued Mexico after being denied environmental approval to mine one of the largest sedimentary phosphate sand deposits discovered off the coast of the Americas, demanding USD 3.5 billion.138
An Odyssey-owned ship engaging in deep-sea mining. (Reuters)
Mexico denied Odyssey’s request due to the projected impact on the Gulf of Ulloa’s ecosystem, specifically on endangered species such as loggerhead turtles, citing concerns over Odyssey’s lack of experience, technical expertise, or data on risky deep-sea mining, which could cause catastrophic impacts on the Gulf of Ulloa.139
The Puerto Chale Fishing Cooperative, whose fishing grounds would have been devastated by the mining project, requested permission to introduce an amicus brief to provide factual information on the project’s effects on the ocean. However, the tribunal rejected their petition, stating it “does not consider Cooperativa as having a significant interest in this dispute.”140 The case is pending.
Conflict of Interest and ‘Double-Hatting'
A significant ethical concern within ISDS is the practice of ‘double-hatting,’ where a legal professional serves as arbitrator and legal counsel in different cases. This duality raises questions about impartiality and independence, eroding public trust in the ISDS system.141
One illustrative example of double-hatting involved the prominent Swiss arbitrator and attorney Gabrielle Kaufmann-Kohler. Kaufmann-Kohler faced scrutiny for her participation as an arbitrator in several cases involving Latin America.
In Vestey v. Venezuela, she served as president of the tribunal,142 wielding the highest power over the case.143 Simultaneously, Kaufmann-Kohler was also a partner in a law firm that advised corporations and governments on matters related to international arbitration, including ISDS disputes.144
In another case, AWG Group v. Argentina, Kaufmann-Kohler served as the corporation’s appointed arbitrator. Argentina sought to disqualify her appointment on several grounds, including that Kaufmann-Kohler had, shortly before accepting her role as arbitrator, been appointed director at an international bank whose investment portfolio included an interest in one of the claimants.145 Nevertheless, the two other members of the tribunal, long-time colleagues of Kaufmann-Kohler, decided her impartiality.146
Such dual roles could compromise the fairness and integrity of the ISDS process, as arbitrators might be incentivized to issue rulings favorable to the interests of potential future clients or aligned with their legal arguments in cases where they serve as counsel. Furthermore, legal professionals who serve as arbitrators often have relationships with the law firms representing the parties and other experts involved in ISDS disputes.
Notably, in the Eiser v. Spain case, the USD 128 million award was annulled because the claimant- appointed arbitrator, Dr. Stanimir Alexandrov,147 omitted to disclose a professional relationship with the claimants’ damages expert, which led to an unfairly constituted tribunal.148 As a result, the total costs of the proceedings, including Spain’s legal fees and expenses, were shifted to the Luxembourg-based corporation Eiser.
It is important to note that this annulment is a rarity due to the lack of uniformity in ISDS proceedings. Applications for annulment on the ground of improper constitution of the tribunal have been scarce and, up until the decision in this case, unsuccessful.149
Following this and similar cases, there have been calls for reforms in the ISDS system to address these ethical concerns, including stricter disclosure requirements and limitations on the roles individuals can simultaneously hold within the ISDS framework, but to date, the reforms have been insufficient.150
Third-Party Funding
Another significant ethical issue in the ISDS system is the practice of third-party funding. This is where external entities cover the costs of arbitration for a claimant, absolving companies from the financial responsibility of initiating disputes against governments.151
This arrangement enables companies to pursue expensive legal battles without worrying about costs.152 As a result, these corporations may be less inclined to settle disputes outside arbitration since they do not face the financial strain of legal fees like small and developing countries do.153
This situation places a heavy burden on governments, which must use public funds to defend against these suits. Although ICSID has recognized the detrimental effects of third-party funding, efforts to limit this practice have been minimal. Currently, the involvement of a third-party funder only needs to be disclosed if specifically requested by the arbitration tribunal.154
The case of South American Silver Limited v. Bolivia (explained in greater detail in the Fueled Social Unrest section below) illustrates these concerns. In this instance, the tribunal ordered the disclosure of the identity of the third-party funders, but when Bolivia sought information about the funding agreement itself, the tribunal denied the request.155
This decision highlighted that the tribunal’s primary concern was identifying potential conflicts of interest with tribunal members rather than addressing broader ethical issues related to third-party funding.
Additional Challenges and Concerns
ISDS tribunals are not bound by legal precedent and frequently leave their decisions unpublished, resulting in inconsistent rulings and legal unpredictability for governments and investors. This lack of legal clarity undermines states’ confidence in formulating and implementing policies, increasing legal uncertainty.156
Additionally, ISDS arbitrations lack an appellate mechanism. There are limited options for review for purely egregious procedural issues but no opportunity to review the substantive determinations.157 This absence means that once an arbitration panel makes a decision, there is no ability to appeal that decision, raising questions about the quality and consistency of legal determinations.
Moreover, the influence of powerful corporate interests in ISDS proceedings is a significant issue. The composition and incentive structure of ISDS panels can allow for undue influence from corporations, as arbitrators may have a financial incentive to rule in favor of investors or interpret treaty obligations broadly to the benefit of corporations. Arbitrators also have an interest in the ISDS system continuing.
As such, although the company and the country must agree on the third arbitrator, this individual will be an expert in international investment law and often predisposed to prioritize the claims of the company over national laws intended to benefit people and the environment.
This dynamic can lead to outcomes that prioritize multinational corporations over other stakeholders, undermining a host state’s ability to regulate in the public interest.
Protest against the World Bank outside of the DC headquarters, April 2024. (Public Citizen)
The corporate power-grab in Latin America and the resulting ISDS cases are especially concerning because there are many Indigenous communities in the region.
Following the newly gained independence from colonial rule, Indigenous peoples in Latin America engaged in ongoing efforts to assert their rights and secure land titles, protect natural resources, and gain recognition for their cultural heritage.158 Globally, countries vary greatly in the extent to which they have made progress in recognizing and addressing the rights and needs of Indigenous populations.159
The recognition of Indigenous rights achieved a significant victory through international instruments like the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the International Labour Organization’s (ILO) Convention No. 169 concerning Indigenous and Tribal Peoples.160
In addition to numerous substantive rights, these international instruments enshrined a set of participatory rights designed to structure the interaction between state decision-making bodies and Indigenous communities in ways that require governments and investors to attend to Indigenous perspectives in pursuing their objectives.161
Right to Free, Prior, and Informed Consent
The right to Free, Prior, and Informed Consent (FPIC) is a cornerstone of Indigenous rights. It recognizes their inherent authority to agree to or reject proposals that may impact their lands, resources, or territories. This right underscores the sovereignty and self-determination of Indigenous communities, acknowledging them as primary stakeholders and authorities in matters affecting their people and environment.162
Sometimes FPIC is used interchangeably with “social license” but the concept pertains to the broader community’s acceptance of development projects within their regions. It is a concept stemming from corporate social responsibility rather than a legal mandate, including but not limited to Indigenous peoples.163
The right to FPIC is fundamentally a protective mechanism, mandating that consent from Indigenous communities must be obtained before initiating any projects or developments in their surroundings. Indigenous communities must consent freely, devoid of coercion or manipulation, and based on comprehensive and accurate information about the potential impacts, benefits, and risks of the proposed actions.164
The FPIC process actively involves Indigenous communities in decision-making about proposed initiatives. It goes beyond mere consultation by ensuring these communities receive complete information and play a central role in decisions. This process includes thorough briefings about the proposed initiatives, empowering communities to make informed decisions within a culturally sensitive and inclusive framework. After making their decisions, it is essential to document and respect them.
FPIC also encompasses ongoing monitoring of approved projects and establishing mechanisms for addressing any grievances that may arise.165
The Conflict between Investor Protection and Indigenous Rights
ISDS and the rights of Indigenous peoples are inevitably at odds. ISDS primarily aims to protect foreign investors to ensure stability for international investments, while Indigenous peoples’ rights are rooted in the protection of their lands, resources, and sovereignty. Latin American governments are often placed in difficult, no-win situations when ISDS cases infringe on Indigenous people.
A significant challenge for Indigenous communities in Latin America is that governments might determine it is not in their best interest to enforce FPIC requirements if they believe they will benefit from FDI.166 In such cases, states may lean towards foreign investors’ interests, potentially participating in or ignoring rights violations, especially when considering investments paramount for economic development and revenue.
Despite Indigenous Peoples’ right to FPIC, few environmental permits in Latin America result from proper consultation, particularly in mining, where recorded consultations are alarmingly low.167 This neglect has severe consequences for Indigenous peoples and their lands.168
Another challenge is enforceability. Indigenous rights are enshrined in international law and enforced by the Inter-American Court of Human Rights (IACHR). Additionally, governments are increasingly adopting them into national law. However, the enforceability in practice is often insufficient as rulings issued by the IACHR are at times not adequately respected.169
In the Mayaga (Sumo) Awas Tingi community v. Nicaragua IACHR case, the Indigenous community brought the case against the Nicaraguan government for granting logging and mining concessions on their ancestral lands without their consent. The court ruled in favor of the community, but when it came time to enforce the award, the process took over eight years, and the compensation was minimal.170
In stark comparison, obligations in international investment agreements and any awards issued by ISDS tribunals are both binding and highly enforceable in domestic and international law.171 If a government refuses to comply with an ISDS award, the foreign investor can enforce it through the domestic courts of a jurisdiction where assets are available to seize against the ruling or find other creative enforcement measures.172
For example, in the 2000s, Argentina lost five ISDS cases under ICSID brought by American investors and did not pay the awards promptly. As a result, the U.S. government intervened on the investors’ behalf by withdrawing trade benefits, and President Obama publicly stated Argentina needed to “pay up.”173
The U.S. government went as far as voting against the World Bank and Inter-American Development Bank making loans to Argentina. The World Bank and Inter-American Development Bank dispersed loans to Argentina only after the five awards were paid to the American corporations by selling deeply discounted bonds.174 Although the awards were not enforced through domestic courts, the foreign investors found a way to force Argentina to pay.
The very existence of an investment treaty susceptible to this interpretation cements a state’s incentives to favor the rights of investors over Indigenous peoples, as it directly places investor prerogatives into conflict with the ability of Indigenous peoples to seek redress for violations of protected rights.
Bear Creek v. Peru
[ISDS CASE FILES]
Bear Creek v. Peru is a striking example of how ISDS proceedings can disregard the right to FPIC. In this case, despite Peru being a signatory to the ILO’s Convention No. 169, requiring consent from impacted communities,175 an ISDS tribunal ordered Peru to give a Canadian mining company USD 30 million for halting a highly unpopular silver mining project that threatened to contaminate Lake Titicaca and vital surrounding waterways.176
Lake Titicaca. (Shutterstock)
In the lapse after approving the project but before mining commenced, Peruvian lawmakers faced strong opposition to the mining project in the form of regional protests and large-scale social unrest due to concerns about the environmental impacts of mining and the threat of contamination in the surrounding waterways, especially to the Indigenous communities in the area that rely on Lake Titicaca for fishing and farming.177
Indigenous people peacefully protesting against Bear Creek’s mining project over concerns of environmental harm to their community. (Aizar Raldes/Getty Images)
The protests turned violent as the government deployed armed forces on the Indigenous community to protect Bear Creek’s foreign investment. (Diario Los Andes/AFP/Getty Images)
These facts were never explained to the peasant communities and population in the area who only heard through third parties and through the news in the Official Gazette El Peruano that rights had been granted over their lands…increasing the population’s suspicions and fears regarding the real intentions of Bear Creek.
– Amicus Curiae from The Association of Human Rights and the Environment.178
However, the tribunal sided with the investors.179 One arbitrator issued a partial dissent, condemning the company for failing to obtain FPIC and abstaining from harmful actions against the Indigenous communities, but Peruvian taxpayers still had to pay the mining company millions of dollars in compensation.180
ISDS Marginalizes Indigenous Voices
In addition to the challenges outlined in the previous section, ISDS poses additional vulnerabilities for Indigenous communities by sidelining their participation. Their involvement is typically limited to indirect roles, not direct participation. These communities often encounter barriers, including financial limitations, language differences, and a lack of legal expertise, impeding their ability to influence ISDS outcomes effectively.181
In ISDS arbitrations, the primary parties are the investing entity (often a multinational corporation) and the host state. Indigenous communities, even if directly impacted, are not formal parties to these disputes. Their participation, when permitted, comes in forms like intervenor status or amicus curiae submissions. However, tribunals are not required to consider these submissions, and if they do, the impact on the final rulings is often minimal.182
Some ISDS arbitration rules allow for third-party interventions, where non-disputing parties, such as Indigenous communities, can submit amicus curiae or ‘friend of the court’ briefs to provide information, expertise, or perspectives on issues relevant to a case,183 like in Bear Creek v. Peru, where the Indigenous peoples’ voice was permitted and they explained the violation of FPIC and subsequent damages caused by the company.184
These contributions can assist arbitrators in understanding the broader implications of the dispute, especially concerning Indigenous rights or environmental concerns. However, amicus briefs have inherent limitations:
Cultural Considerations: The formal legal ISDS environment is not designed to grasp and respect Indigenous communities’ cultural nuances and traditional knowledge. Given the indirect nature of participation, adequate consent and representation issues can arise.
And, as mentioned, tribunals do not always allow the submission of amicus briefs, further marginalizing the affected communities.
Colombia’s pristine páramos, threatened by mining exploits. ( The Bogotá Post)
Triple Losing
ISDS cases pose significant challenges to Indigenous rights, particularly those related to land, sovereignty, and environmental protection. Often, these disputes create precarious situations for Indigenous communities, as the economic interests of foreign investors can threaten their ancestral lands and heritage.189
As a result, ISDS cases create a ‘triple losing’ situation for Indigenous communities, involving a range of adverse consequences that they endure due to these cases. This scenario, explained in a 2020 study from the National Institutes of Health, encompasses three main dimensions of loss: social and environmental, legal, and financial.190
Social and Environmental Loss
The circumstances leading to an ISDS dispute can have detrimental social and environmental impacts on Indigenous communities. These impacts may include pollution of water sources, soil contamination, deforestation, and disruption of ecosystems critical to Indigenous livelihoods, cultures, and spirituality.191 The outcomes of ISDS cases may exacerbate these adverse effects, leaving communities with a sense of injustice and inadequate compensation for their damages.Legal Loss
Indigenous communities often find their concerns inadequately addressed or marginalized within ISDS proceedings. As discussed in previous sections, the legal environment in ISDS is typically dominated by investors and states, which may not consider the unique perspectives, cultural nuances, and ethical considerations of Indigenous peoples.Furthermore, ISDS tribunals often undermine national legal frameworks and international instruments, such as the ILO Convention No.169 and the UNDRIP, that enshrine hard-fought Indigenous rights.192 As a result, the decisions made in ISDS cases may not adequately protect Indigenous rights or respect their traditional knowledge.
Financial Loss
ISDS cases can impose a significant financial burden on the host country, which affects its ability to allocate resources for social spending and public welfare. This financial loss occurs primarily due to the substantial compensations that host countries may be required to pay investors due to ISDS rulings. Even in cases where investors do not win, the cost of legal representation and arbitration fees can still be substantial, diverting resources from essential social programs and public services.193Nowhere is this tug of war between corporate gains and public welfare more apparent than in Latin America. When corporations secure financial gains through ISDS rulings, a government’s capacity to protect its citizens and the environment can be compromised. This dynamic exacerbates inequalities and social injustices, particularly impacting marginalized groups and Indigenous communities.
For example, Peru is facing 18 pending ISDS cases, amounting to a liability of at least USD 2.23 billion in known potential owed damages for only seven of the cases, as the remaining 11 cases are withholding amounts sought.194 The sum equals over 3.5 percent of Peru’s national budget, meaning that if tribunals find in favor of companies, the government must allocate to corporations funds intended for public education, healthcare, infrastructure, and social programs.195
Looked at another way, the amount could cover all of the costs of transport, water sanitation, forestry, social investment, private and SME development, education, health, and housing projects currently approved by the World Bank and the International Development Bank’s portfolio of Peru, with money left to spare.196
Even ISDS cases that states “win” can impose a significant financial burden on host countries due to the high cost of legal representation and arbitration fees. Although the specific cost of cases is often unknown, governments spend USD 4.7 million on average to defend themselves in ISDS disputes.197
The following ISDS case demonstrates how Indigenous people bear the triple burden of losses, emphasizing their challenges in land conservation, sovereignty, environmental protection, and the resulting social unrest:
Pac Rim v. El Salvador
[ISDS CASE FILES]
In Pac Rim Cayman LLC v. El Salvador, the tribunal dismissed a claim and ordered the company to pay some of the country’s legal fees, but the government still spent years and millions of dollars defending itself against a spurious claim. In this conflict, Pac Rim, a Canadian mining company, sued El Salvador when it halted their mining project, demanding over USD 300 million.198
El Salvador halted the project in response to concerns from local communities and environmental organizations regarding the project’s potential harm to water resources and intensification of the country’s water crisis. The mine had already heavily polluted the water, and Pac Rim planned to use cyanide as the project continued.199
Indigenous communities, particularly the Lenca and Kakawira tribes in Cabañas, were at the forefront of opposition to the project.200 Grassroots organizations and activists formed the National Roundtable (“Mesa”) to campaign for a mining moratorium, which was eventually passed. Tragically, two community leaders were murdered, and local activists, politicians, and other protesters faced death threats, violent attacks, and even kidnapping.201
Although the tribunal considered an amicus brief at the jurisdictional stage, ultimately narrowing PacRim’s case by excluding claims under CAFTA,202 the tribunal refused to consider an amicus brief from the perspective of local communities to inform the tribunal of the severe risks associated with the mining project.
First, the Parties refused to disclose facts of the case to the non-disputing parties and second, the tribunal did not find the issue of community participation relevant to the claim, effectively silencing the voices of the Cabañas in a case regarding their water and soil.203
Salvadorans protest against ICSID as a response to the Pac Rim Mining case. (Center for International Environmental Law)
The ensuing cross-border media and public education campaign highlighted the egregious nature of the case, and in the end El Salvador’s vigorous legal defense was successful.
The ISDS tribunal dismissed all of PacRim’s claims on the merits and ordered the company to pay El Salvador USD 8 million (out of the reported USD 12 million spent) in legal fees.204 On the surface, this may appear as a victory, yet it is crucial to recognize that this outcome does not equate to a win for El Salvador.
The lawsuit, filed in 2009 (three years after the denial of a permit), resulted in civilian deaths and the potential threat of El Salvador being forced to pay over 2% of its GDP.205 Furthermore, while the tribunal ruled in favor of El Salvador in this instance and ordered Pac Rim to pay El Salvador’s legal fees, in many similar ISDS cases, states are not as fortunate and end up losing millions in legal fees alone.206
The failure of an international mining company’s attempt to wrongfully sue a sovereign state does not erase the lawsuit itself or the legal mechanisms that legitimized and enabled such behavior. El Salvador was grappling with a water crisis, and the democratic consensus was unequivocally against constructing another mine that would exacerbate water pollution and scarcity.207
In defiance of the democratic will of a sovereign nation, this Canadian-owned enterprise resorted to violence.208 Even though they lost in arbitration, the battle is far from over. Other corporations may attempt similar actions against other countries, and institutions like ISDS continue to legitimize such behavior.
It is uncontroverted that opposition to Pac Rim’s plans for El Salvador arose organically from the first-hand experiences of affected local communities and their commendable efforts to organize and protect themselves… the first stirrings of opposition were engendered by Pac Rim itself when in 2003 and 2004, as it ramped up exploratory drilling work, its technicians and engineers trespassed on the private property of local residents, drilling exploratory wells without permission and in a manner that was both “suspicious and arrogant” and people living near mining exploration activities began to notice environmental impacts from the mining exploration – reduced access to water, polluted water, impacts to agriculture, and health issues.
– Amicus Curiae Brief from the Center for International Environmental Law. 209Foiled Land Conservation Efforts
The Amazon rainforest holds immense global and local significance as it is a crucial resource for people worldwide. It provides not only sustenance in the form of food, water, wood, and medicines, but also plays a pivotal role in climate stabilization, with the Amazon rainforest storing an astonishing 150-200 billion tons of carbon.
Yet when Colombia enacted protective measures for its rainforest through national legislation, it faced swift retaliation from foreign investors.210
Cosigo Resources v. Colombia
[ISDS CASE FILES]
In Cosigo Resources, Ltd. et al. v. Colombia, American and Canadian mining companies joined forces to punish Colombia for protecting part of the Amazon rainforest by establishing the Yaigojé Apaporis National Park, demanding USD 16.5 billion in damages, despite having spent only USD 11 million on its investment.211
In 2008, the companies were granted interests in a gold mining concession by the Alvaro Uribe administration in the Taraira region of Colombia, near the Brazilian border.212
Before they reached a final agreement, Colombia created a national park in the proposed locations of the mines to protect the biodiversity of the Amazon and seven main Indigenous peoples in the area: the Macuna, Tanimuka, Letuama, Cabiyarí, Yauna, Barazano, and Yujup Macú groups, which have an approximate population of 1,536 people spread across 19 communities.213
In this ongoing case, the investors have claimed that creating the national park was “illegitimate,” and denying their concession due to the park constituted an expropriation of their investment.214
Yaigojé Apaporis Indigenous Reserve and Natural National Park. (Fundación GAIA Amazonas)
Crystallex v. Venezuela
[ISDS CASE FILES]
Crystallex v. Venezuela is another example of ISDS infringing on government-protected lands. Crystallex, a Canadian mining company, launched an ISDS claim against Venezuela for denying the environmental approval required for a gold mining project following protests concerning ecological impacts and potential effects on Indigenous lands.215
Damage left behind in the Imataca National Rainforest Reserve by Crystallex. (randomvariableintheuk/ bilaterals.org)
Although Crystallex acquired rights to explore a gold mine in the Imataca National Rainforest Reserve in Venezuela, after assessing potential environmental impacts, especially the impacts on local Indigenous communities in the Imataca region, the Venezuelan government refused to allow Crystallex to begin mining operations and denied the necessary environmental permit.216 Crystallex then used the Canadian-Venezuelan BIT to bring suit against Venezuela.217
The tribunal held that Venezuela unlawfully expropriated the investment and awarded the company USD 1.2 billion plus interest.218 After the tribunal issued the award, the parties opted to settle the dispute privately, and the final sum paid by Venezuela is unknown.219
Eco Oro v. Colombia & Red Eagle v. Colombia
[ISDS CASE FILES]
In recent years, Colombia has taken steps to protect the Santurbán Páramo, a high-mountain ecosystem that plays a central role in maintaining biodiversity. It also provides water to approximately 2.5 million people in 68 surrounding municipalities (85% of the country’s water supply) 220 and holds spiritual significance to the Indigenous communities in the region.221
Eco Oro Minerals Corp. and Red Eagle Exploration Limited launched ISDS cases against Colombia for creating a natural reserve in the region and prohibiting mining activities, seeking USD 700 million222 and 118 million, respectively.223
Abengoa v. Mexico
[ISDS CASE FILES]
Even international organizations, such as the United Nations Educational, Scientific and Cultural Organization (UNESCO), cannot protect Indigenous communities’ ancestral lands from ISDS attacks. UNESCO designates regions as World Heritage Sites for having cultural, historical, or other significance considered of outstanding value for humanity.224
Protesters with the Todos Somos Zimapán movement. (Community Peacemaker Teams)
In Abengoa v. Mexico, a Spanish company sued Mexico and won when the government denied authorization for a controversial hazardous waste facility, as it posed a significant risk to Indigenous communities.225
The plant was to be built on a geological fault line across from a dam and the Sierra Gorda biosphere reserve, a UNESCO World Heritage site and home to Nanhu and Otomi Indigenous communities. Previous mining operations had already contaminated the region with arsenic, and the community contended that building a waste facility on a fault line, by a dam, in an area contaminated with arsenic near Indigenous communities and an environmental reserve posed a significant environmental threat.226
As a result of substantial public opposition, Abengoa’s land use permit was not renewed in December 2007, although construction continued anyway.227 In April 2009, clashes broke out between a group from Zimapan and the Mexican federal police over the plant.228
The locals were protesting under the “Todos Somos Zimapán” (“We Are All Zimapán”) movement, citing concerns about the plant’s potential health effects and other negative impacts on the two dozen Indigenous communities and 20 freshwater springs located within a five-kilometer radius of the waste facility. As a result, Mexico revoked the company’s operating license several days later.229
The situation escalated as Mexican federal police were accused of abuses against the Indigenous population, and federal government officials declared the plant could open without municipal authority.230 In March 2010, the municipality of Zimapan declared that the operating license was invalid because the city council did not collectively issue it and did not comply with the public interest.231
Abengoa alleged that the government actions impeding the operation of its waste plant violated its BIT-protected investor rights.232 Ultimately, the tribunal sided with the investor and ordered Mexico to pay over 586 million pesos (USD 31 million) plus interest in 2013.233
Attacks on Sovereignty
ISDS undermines government sovereignty by allowing foreign investors to challenge and potentially override a host country’s laws, regulations, and policies, even Indigenous rights. When disputes arise, ISDS tribunals can make decisions that compel governments to pay significant compensation to investors or avoid large payouts by weakening domestic laws and regulations.234
This authority can effectively erode a nation’s ability to govern in its citizens’ best interests and protect its sovereignty, as it places international corporate interests above national laws and regulations, limiting the government’s ability to enact and enforce policies in the public interest.235
Prospera v. Honduras
[ISDS CASE FILES]
The unfinished Prospera ZEDE “investment.” (Public Citizen)
In 2013, Honduras passed the Organic Law of the Employment and Economic Development Zones (ZEDEs Organic Law), which appeared to designate areas as special employment and economic development zones (‘ZEDEs” in their Spanish acronym). The legislation allowed investors to establish their own laws, create an independent justice system, and have administrative and fiscal autonomy.237
The ZEDEs were very unpopular with Hondurans and viewed as a “vector for corruption,” garnering widespread criticism and social unrest.238 Since the National Congress of Honduras unanimously voted to repeal the ZEDEs law in 2022, Próspera has continued its operations even as it pursues its ISDS case seeking USD 10.7 billion, two thirds of the country’s annual budget.
Local residents of the Crawfish Rock community speaking out against the ZEDEs. (Public Citizen)
The Crawfish Rock community, March 2024. (Ladan Mehranvar)
“The Prospera ZEDE cropped up out of nowhere one day and we have seen devastating environmental harm to our community ever since. We were not consulted, no one asked if they had permission to build or what the project would entail. We have been in this territory for centuries and the [foreign investors] keep expanding. Since they arrived, the environment has changed. We are experiencing floods for the first time, our river has dried up, threatening many species of plants and animals.”
– Luisa Connor and Venessa Cardenas, Black-English and Afro-Indigenous members of the Crawfish Rock community in Honduras.
The Próspera ZEDE, located in Roatán, a Caribbean island off the coast of Honduras, is of particular concern to the Black-English, Garifuna, and Indigenous Miskito people who have inhabited the island since the 18th century; they worry that interference with their land, water, and marine environment will worsen.239
In March 2023, 33 U.S. lawmakers urged the U.S. Trade Representative and State Department to intervene on behalf of Honduras in this egregious ISDS case. They cited violations of the nation’s sovereignty and democracy and called for the removal of ISDS from existing trade agreements.240 The case is currently pending.
Environmental Harm
Mining operations can contaminate nearby water bodies with toxic substances like heavy metals and sulfuric acid, endangering aquatic life and making water unsafe for human use.241 Additionally, mining activities, especially those involving explosives and heavy machinery, release harmful particulate matter and gasses into the air, leading to respiratory problems and air quality deterioration.242
The destruction of habitats and pollution can result in biodiversity loss as many species struggle to survive in the altered environment.243 Furthermore, the energy-intensive processes and transportation associated with mining contribute to greenhouse gas emissions, exacerbating global climate change.244
Fossil fuel extraction, integral to the mining industry, inflicts severe environmental harm. This process, encompassing coal, oil, and natural gas extraction, disrupts ecosystems through land disturbance, drilling activities, and habitat destruction. Moreover, it contaminates groundwater and surface water sources with toxic chemicals.
The combustion of fossil fuels exacerbates climate change, causing rising sea levels, extreme weather events, and biodiversity loss. Additionally, oil spills during extraction and transportation devastate both terrestrial, as well as marine environments and coastal communities.245
Efforts to mitigate these environmental harms include implementing responsible mining practices, adopting sustainable mining techniques, limiting fossil fuel extraction, and adhering to environmental regulations and best practices. However, investors often use ISDS to prevent them.
Knowing they could face costly challenges, governments may hesitate to enact or enforce environmental regulations, resulting in weaker environmental standards and less stringent enforcement, allowing for more ecological harm.246
Legacy Vulcan v. Mexico
[ISDS CASE FILES]
Legacy Vulcan’s resource extraction scarring the Mexican landscape. (The Global Atlas of Environmental Justice)
In 1986, the investor acquired a limestone quarry lot and in 1996, acquired two more.249 The investor claims it entered into an agreement with the Mexican federal government and local state government of Quintana Roo, receiving authorization “from an environmental standpoint” to exploit the limestone reserves.250
Upon learning that the company had extracted limestone from a greater area and at a faster pace than agreed upon, the Mexican government implemented measures to safeguard the environment and prevent further damage. The company claimed these were “adverse measures” that unfairly targeted them.251 The case is pending.252
Chevron v. Ecuador
[ISDS CASE FILES]
Toxic sludge. (Teun Voeten/Reporters/Redux)
For 26 years, Texaco Petroleum Corporation, later acquired by Chevron, performed oil operations in Ecuador. Domestic courts found that during that period, the company dumped billions of gallons of toxic water and dug hundreds of open-air oil sludge pits in Ecuador’s Amazon, poisoning the communities of some 30,000 Amazon residents, including the entire populations of six Indigenous groups (one of which is now extinct).254
The Indigenous communities in the Amazon experienced devastating social and environmental impacts. The pollution of water sources, soil contamination, and deforestation led to health issues and disrupted the ecosystems vital for their livelihood, culture, and spirituality.255 The ISDS case compounded these impacts, with the communities feeling the absence of justice and adequate compensation for the damages suffered.
Chevron was sued in domestic courts, a legal battle spanning two decades and two countries. In November 2013, Ecuador’s highest court upheld prior rulings against Chevron for contaminating a large section of Ecuador’s Amazon and ordered the corporation to pay USD 9.5 billion to provide desperately needed cleanup and healthcare to afflicted Indigenous communities.256
Instead of abiding by the rulings, Chevron launched an ISDS suit to challenge the decision produced by Ecuador’s legal system. Chevron asked the tribunal to order Ecuador’s taxpayers to hand over to the corporation any of the billions in damages it might be required to pay to clean up the still-devastated Amazon, plus all the legal fees incurred by the corporation in its ISDS case.257
The tribunal declared that rights granted by Ecuadorian law do not exist and ordered Ecuador’s government to violate its own Constitution by overturning a ruling in its domestic court system.258
The tribunal issued a partial award in favor of the investors, but the final award on damages is pending.259
““If protecting nature, protecting our rights, and the climate threatens a company’s investment, then that’s a problem. Companies like Chevron should be punished for contamination and rights abuses, not rewarded. They shouldn’t be given a get out of jail free card by some arbitration court. We are paying the price with our lands, lives, and our culture.”
– Donald Moncayo, President of the UDAPT (Union de Afectados por Texaco) and Consuelo Piaguage, Siekopai Indigenous Leader.
Fueled Social Unrest
Foreign investors and the ISDS system have been associated with social unrest and protests in Indigenous communities for several reasons. Since foreign investments often intersect with Indigenous land rights, sovereignty, and environmental harms, it is unsurprising that social unrest in Indigenous communities is a common element in these cases.260
Indigenous communities often form alliances with activists and civil society organizations to amplify their voices and advocate for their rights, resulting in larger-scale protests and campaigns against problematic projects.261
South American Silver Limited v. Bolivia
[ISDS CASE FILES]
Perhaps the worst case of violent clashes and social unrest is illustrated in South American Silver Limited v. Bolivia, where a Bermuda-based mining company was accused of heinous acts.
The company had been granted mining concessions in Bolivia, all located in areas inhabited by Indigenous communities.262 These communities accused the mining company of polluting sacred lands and ardently protested. Indigenous communities further accused the company of abusing authority and other heinous acts, including violent sexual attacks against women.263
The South American Silver Limited mine. (Martin St-Amant)
Eventually, the protests turned violent, and clashes became increasingly hostile and frequent. To quell the unrest, Bolivia intervened and reversed the ownership of the mining concessions.264
The company launched an ISDS case against Bolivia under the United Kingdom-Bolivia BIT. Despite the noted failure to establish any positive relationship with the Indigenous communities or even acknowledge their existence, the tribunal sided with the company and ordered Bolivia to pay USD 18.7 million.265
KCA v. Guatemala
[ISDS CASE FILES]
Guatemalan police tear gas protestors of the case. (James Rodríguez)
La Puya, an environmental justice movement in Guatemala that had been fighting for community consultation from foreign investors for years, applied to file an amicus curiae on behalf of the impacted Indigenous communities.267 Despite numerous attempts, the tribunal denied their participation.268
By marginalizing the voices of the Indigenous peoples and civil societies fighting against corporate overreach, the company’s use of private security forces who brutalized peaceful protesters with beatings, tear gas, and arrests went unanswered. The Guatemalan government revoked the rights to the project due to the violence deployed against the protestors, launching the dispute.269
The tribunal’s refusal to hear this crucial aspect of the situation underlines the preferential treatment investors receive.
Copper Mesa v. Ecuador
[ISDS CASE FILES]
In Copper Mesa v. Ecuador, a Canadian mining company sued Ecuador after the revocation of a mining concession due to violent clashes between its security personnel and local communities, including Indigenous people opposing mining on their lands.270
Ecuador’s decision to revoke it was driven by concerns about the environmental impact of mining and the threat of contamination to the surrounding waterways, which were crucial for Indigenous communities’ fishing and farming activities.271
Despite the tribunal ruling that Copper Mesa was negligent, they still ordered Ecuador to pay USD 26.5 million in addition to their legal and arbitration fees.272
Burlington Resources v. Ecuador
[ISDS CASE FILES]
The oil facility seized by the Ecuadorian government after Burlington Resources stopped paying taxes. (Unknown)
Following a substantial rise in oil profits, Ecuador raised a “windfall tax” of 50% on profits received by oil companies resulting from increased prices. Burlington paid the taxes from 2006 to 2009, then stopped altogether.274 To continue enforcing the tax, Ecuador seized portions of Burlington’s production.275 Burlington then launched an ISDS case against Ecuador, alleging wrongful expropriation.276
The Tribunal ruled in favor of Ecuador because the company breached domestic environmental law but ordered Ecuador to pay a whopping USD 379 million for seizing the oil facility.277
Lake Titicaca, once worshiped by the Incas, is now littered with trash. (AP Photo/Rodrigo Abd)
As demonstrated in the cases above, ISDS is used by corporations as a tool to undermine national sovereignty and the rights of Indigenous People in Latin America. The following policy recommendations aim to rectify these imbalances in the current ISDS framework, focusing on reforming existing and future FTAs and BITs and safeguarding the interests of Indigenous peoples.
Adopting a ‘Do No Further Harm’ Approach
Governments worldwide are increasingly scrutinizing the inclusion of ISDS provisions in trade and investment agreements, with a view that such clauses can impinge on their regulatory autonomy.278 For instance, President Biden made a campaign promise to exclude ISDS provisions in any new trade agreements his administration negotiates.279 Similarly, other governments are thinking twice before inking new ISDS-enforced pacts.
Despite these efforts, FTAs and BITs with ISDS provisions continue to be negotiated or pending ratification. Governments participating in such negotiations should change course and exclude ISDS clauses.
This exclusion is pivotal for enabling governments to reclaim their legislative and regulatory autonomy, empowering them to enact laws and regulations in the best interest of their citizens, the environment, and the public good. It also promotes the evolution of international investment law toward a more equitable framework where the rights and obligations of investors and states are clearly defined and upheld.
However, whether governments ink new ISDS pacts or not, the presence of thousands of ISDS-enforced agreements that remain in effect poses a significant challenge. Terminating existing agreements with ISDS mechanisms and addressing “survival clauses” — provisions that allow ISDS claims to be brought even after a treaty’s termination — is necessary for policymakers to regain full regulatory control. These clauses, unless neutralized, can undermine national sovereignty and regulatory autonomy by allowing investors to challenge regulations.
Policymakers must prioritize the elimination of survival clauses to prevent future legal challenges to national sovereignty, regulatory autonomy, and the public interest.
Although there are differing legal opinions on the various mechanisms to neutralize survival clauses, many academics and practitioners believe that if all parties to the agreement give consent, then the clause is neutralized.280
Removing ISDS From Existing Agreements
Interim Steps Toward Safeguarding Indigenous Peoples’ Rights
In summary, the historical and contemporary challenges faced by Indigenous communities in Latin America underline the profound effects of colonial legacies and the modern exacerbations perpetuated by the ISDS system.
The echoes of colonial exploitation through the ISDS framework continue to disadvantage Indigenous populations, reinforcing old hierarchies by prioritizing foreign investment over indigenous rights and environmental sustainability.
The documented cases and the staggering sums involved in ISDS disputes highlight an urgent need for a reassessment of international investment agreements, emphasizing the importance of aligning them with the fundamental rights of Indigenous Peoples and the ecological imperatives of our times.
The path forward, as proposed in this report, involves a robust realignment of international legal frameworks, by removing or drastically amending ISDS provisions within FTAs and BITs.
Further, while governments are working on removing ISDS provisions from international treaties, they can take interim steps to include Indigenous rights in FTAs and BITs, ensuring FPIC is a respected right integrated into the fabric of international investment law, and ensures their active participation in dispute resolution.
While ISDS exists, the institutions themselves must adapt to permit and adequately understand the participation of Indigenous communities affected by foreign investment. This shift is essential not only for rectifying historical injustices but also for preventing the continuation of these injustices under modern guises.
Thus, the call to action is clear: reform investment treaties to ensure they serve as tools for sustainable development rather than instruments of economic exploitation and corporate colonialism.