Investor–State Disputes in the Fossil Fuel Industry

Phasing out fossil fuels is critical to global efforts to tackle climate change, but actions to curb emissions are hindered by protections granted under international investment law. This report analyzes the extent to which investor–state disputes protect foreign investments in fossil fuel projects—and therefore obstruct climate action.

By Lea Di Salvatore on December 31, 2021
  • The fossil fuel industry accounts for almost 20% of the total known investor–state dispute settlement cases across all sectors-making it the most litigious industry in the ISDS system.

  • There has been a recent but growing wave of investment arbitrations initiated by the fossil fuel industry to counteract critical climate measures, such as the phasing out of fossil fuels.

  • Most known ISDS cases related to fossil fuels are decided in favour of investors. The average amount awarded—over USD 600 million—is almost five times the amount awarded in non-fossil fuel cases

As the consequences of burning fossil fuels become increasingly evident, policy-makers across the globe are stepping up their efforts to phase them out and curb emissions. However, under current international investment law, foreign investments in fossil fuel projects are granted special protection. Through a process known as investor–state dispute settlement (ISDS), fossil fuel investors can bring claims to international tribunals regarding regulatory measures adopted by host countries, which they allege breach their investment privileges.

This report analyzes the trends in investor–state disputes initiated by investors in the fossil fuel industry to understand the extent to which this industry relies on ISDS to protect its investments. It identifies and examines 231 known investment arbitrations related to fossil fuels, which account for 20% of the total known ISDS cases across all sectors. The findings suggest that the fossil fuel industry has been using the ISDS system extensively to protect its investments, thereby presenting a major obstacle for countries seeking to phase out fossil fuels and tackle climate change.

Report details

Investment Law & Policy
Climate Change Mitigation
The Energy Charter Treaty
Focus area
IISD, 2021