The International Investment Legal Regime, Climate Change, and Human Rights: An Overview (October 2025)
The Center for International Environmental Law (CIEL) has long warned that investor-state dispute settlement (ISDS) threatens climate action and undermines countries’ compliance with their legal obligations to prevent and remedy climate harm. Embedded in thousands of international investment agreements, the little-known ISDS system allows foreign companies to sue states for damages when they take measures to protect the environment and the public.
Our brief, The International Investment Legal Regime, Climate Change, and Human Rights: An Overview, examines how ISDS stands in direct conflict with growing global momentum for bold climate action—and how we can stop it. The brief highlights how recent legal developments, including historic rulings on climate change from international courts, bolster the case against ISDS.
The growing judicial consensus on states’ climate duties makes clear that ISDS presents an impermissible barrier to the necessary phaseout of fossil fuels and other climate measures required under international human rights and environmental law. Recent landmark advisory opinions from the International Court of Justice and the Inter-American Court of Human Rights affirm that states have legal obligations, under multiple sources of international law, to regulate polluting industries to protect human rights and prevent climate harm. Yet ISDS continues to shield those very industries from accountability.
ISDS allows corporations to bypass domestic courts and challenge public interest regulations before private ad-hoc tribunals. These tribunals can award billions in publicly funded compensation, creating a “regulatory chill” that deters governments from taking necessary climate action. Fossil fuel companies alone have launched over 300 ISDS cases, seeking over $80 billion in damages for policies aimed at phasing out oil, gas, and coal.
Paying polluters cannot be the price for protecting people and the planet. Building on CIEL’s prior work, this brief outlines:
- How ISDS erodes sovereignty and obstructs a just energy transition.
- Why climate and human rights obligations should supersede corporate interests
- What States can do to remove the threat of ISDS, including withdrawal from treaties with investment arbitration provisions, exclusion of fossil fuels from investment protections, and alignment of trade and investment rules with human rights obligations.
As countries ramp up climate action, they must also dismantle the legal architecture that protects polluters to avoid potentially billions more in future claims.
This publication provides states and other interested advocates with an overview of how ISDS negatively impacts human rights and the environment, as well as suggested ways forward to challenge ISDS, leveraging recent judicial rulings that clarify states’ binding legal duties to prevent climate harm.
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