Corporate Courts versus The Climate

Fossil fuel companies are using secretive tribunals written into trade deals to sue

These big polluters should be paying to fix the climate crisis they caused, but instead they want a payout.

Fossil fuel companies are using tribunals set up outside of national legal systems specifically for corporations to use – effectively they are ‘corporate courts’. It’s a system written into trade and investment deals which allows foreign corporations to sue governments for vast amounts. Formally, it is known as investor-state dispute settlement or ISDS.

The Energy Charter Treaty is a giant corporate court deal which many of the fossil fuel companies are using to sue. The UK government is also trying to include corporate courts in several new trade deals.

The owners of the Keystone XL pipeline, Canadian company TC Energy, are suing the US after President Biden cancelled the pipeline on climate change grounds. They are demanding an astronomical $15 billion.

Keystone XL was intended to carry tar sands oil from Alberta in Canada to the US. It would have increased the market for tar sands oil and encouraged more extraction. We know we need to leave all types of fossil fuel in the ground to have any chance of stemming the climate crisis, and tar sands are particularly devastating.

Tar sands are a sludgy mix of sand, clay, water and sticky, thick oil. The oil extraction produces more climate gases than conventional oil, and a large proportion of the extraction is done by strip mining the surface. It leaves behind toxic waste and pollution.

The Canadian tar sands are in northern Alberta, underneath an area of boreal forest which is seven times the size of Wales.

Production took off in the last two decades and whole swathes of land are now covered with mines, increasing emissions and destroying forest.

The mines have also displaced First Nations communities and polluted their air and water.

The Keystone XL pipeline was proposed in 2008. Its route would have crossed further Indigenous lands, water sources and environmentally sensitive regions, with risks of leaks which have happened with other pipelines in the region.

Resistance to the pipeline built with protests, rallies and blockades. Eventually this people power turned things around and in 2015 Obama rejected the permit for the pipeline. The pipeline owners started threatening a corporate court case, but when Trump was elected, he reinstated the pipeline.

On Biden’s first day in office in 2021, he cancelled it again, saying it was incompatible with the ‘climate imperative’. The owners promptly launched an ISDS case.

In 2015, the year of the Paris climate summit, the Netherlands seemed to be heading in the wrong direction. Despite the lofty goals of the global summit, the Dutch government had just allowed energy company RWE to open a new coal-fired power station. The following year, a further new coal-fired plant was opened by another company, Uniper.

It seemed to sum up all the frustrations of climate campaigning over recent decades. The need for action to tackle the climate emergency had never been clearer, but governments were dragging their feet and the fossil fuel industry was taking advantage. Climate activist group Urgenda had resorted to taking the government to court over its failure to set more ambitious carbon emission targets, winning an initial ruling.

But the pressure from climate activists did not let up. There were many demonstrations and protests in the Netherlands in those years, and the Urgenda court ruling was confirmed by the supreme court in 2019.

At the end of that year in response to this pressure, a law was passed by the Dutch parliament to phase out the use of coal altogether, requiring the shutdown of coal power stations.

Now both Uniper and RWE are suing the Dutch government in the hope of getting a massive payout. These companies profited first from the government’s inaction and the government is actually offering compensation. But they’re trying their luck to see if they can profit more through corporate court cases. RWE wants €1.4bn and Uniper €900m.

This is holding climate action to ransom.

The implications of these cases are wider and more dangerous than just the cost for the public purse in the Netherlands. Corporate court cases can often be secretive and hard to find out about, but Uniper and RWE have been public and vocal in their threats. So much so that it would seem the target is not just the Netherlands, but to send a warning to any other country that might be considering passing similar laws.

Governments in Germany, Denmark and New Zealand have already admitted restricting their climate policies because of the dangers of being sued in corporate courts. And the risks are especially high for developing countries, for whom the amounts at stake are a far higher proportion of their budgets.

This affects our future.

Cerrejón is an open cast coal mine in Colombia – the largest in Latin America. Much of its coal is exported to Europe. It has been controversial for decades. Over 30 communities have been displaced to make way for the mine, and people living nearby have suffered health problems, environmental damage, and violence and intimidation for raising concerns.

In 2017 local communities won a case in the Colombian supreme court against the diversion of a river to expand the mine. The mine owners, including Anglo-American, are now turning to corporate courts to challenge that decision.

How did we end up with such an unjust system as corporate courts? If it seems designed to favour the interests of fossil fuel firms and big business, that’s because it was.

Back in the 1950s and 1960s, a group of businessmen were worried about the policies of newly independent countries. These former colonies were talking about now being able to control their own resources. A group led by Hermann Abs, a banker, and Hartley Shawcross, a lawyer at that point working for Royal Dutch Shell, and including others from the

forerunners of ExxonMobil, Total, Rio Tinto and more, got together. They drafted the prototype for ISDS agreements, specifically in order to protect oil and other big business interests.

So the corporate court system was created to protect fossil fuel companies from the threat posed by the anti-colonial struggle. It is no surprise that it is the system fossil fuel companies turn to now to protect themselves against the struggle for climate justice.

The risk to climate action from corporate courts is only going to grow. We know industry insiders themselves expect that more ambitious climate policy will drive an increase in cases. The amounts at stake could be over $9 trillion – that’s more than ten per cent of the global economy.

We need to get rid of corporate courts. And we know that we can. Across the world, countries such as South Africa, India, New Zealand, Bolivia, Tanzania and the US are rejecting corporate courts. The UK needs to step up and join them.

Global Justice Now works as part of a global movement to challenge the powerful and create a more just and equal world. Our local activists campaign around the country for a global economy where people come before profit.

Find out more and get involved in the campaign on corporate courts: globaljustice.org.uk/trade