8 July 2024

Trade policy could be used to play a positive role in addressing the climate crisis and contributing to cross-departmental government thinking on climate change, health and human rights.

To date, international trade agreements involving the UK have generally facilitated, rather than challenged, the growth of polluting multinational corporations (MNCs) in the extractive industries. This has resulted in serious environmental damage and human rights abuses. It has also put responsible companies at a disadvantage. This is due to the inclusion of the Investor-State Dispute Settlement (ISDS) mechanism within many Free Trade Agreements (FTAs) and Bi-lateral Investment Treaties (BITs). The ISDS mechanism permits MNCs to sue democratically-elected governments in secret International Arbitration Tribunals, for introducing new policies on environment, health and human rights, when they are perceived to impact negatively on MNC investments. Among the many concerns expressed by States and critics, are the incompatibility of ISDS with international human rights law – crippling damages awards, secrecy, restrictions on States’ ability to regulate, inconsistent tribunal decisions, the high costs of defending arbitration claims and conflicts of interest or the perceived bias of arbitrators in favour of investors.

Since Brexit, the UK has not included the ISDS mechanism in any of its FTAs, and it has pulled out of the Energy Charter Treaty, an investment agreement which allowed fossil fuel companies to sue governments using its ISDS provisions, even when they took actions related to addressing climate change. The UK stated that it did not “align with our unwavering commitment to energy security and net zero.” Nevertheless, the UK does have over 80 historic agreements that contain ISDS. Globally, the ISDS system has seen at least US$114bn of public money awarded to corporations, with fossil fuel MNCs being the biggest beneficiary, according to a global ISDS tracker. This is money, paid out of the public purse, and almost equalling the amount paid by rich nations globally in climate aid in 2022. This does not make sense in the current climate crisis.

“By slowing, weakening and in some cases reversing climate and environmental actions, ISDS claims have devastating consequences… yet, international investment and trade agreements rarely incorporate effective provisions for environmental protection, while human rights obligations are ignored…[additionally] ISDS arbitration tribunals routinely prioritise foreign investment and corporate interests above environmental and human rights considerations.” David Boyd UN Special Rapporteur

The Colombia – UK BIT contains the ISDS mechanism. This Treaty has an initial term of 10 years, which ends in October 2024, after which it automatically renews for an indefinite further term. It also includes a ‘sunset clause’ which states that the provisions of the Agreement persist for a further fifteen years, unless this clause is neutralised by both parties.

Colombia, a country rich in biodiversity, has been disproportionately impacted by ISDS claims, with 23 listed between 2016 and 2023. These are claims for millions of pounds, related mainly to policies enacted to address climate concerns and human rights. Incorporating the damaging ISDS mechanism in the Colombia-UK BIT contradicts other UK priorities in relation to Colombia, such as Colombia being a key partner of the UK on climate issues and the UK being penholder at the UN Security Council for the Colombian Peace Process.

Labour should:

• Bilaterally terminate the Colombia-UK Bilateral Investment Treaty after October 2024
• Work with the Colombian government to jointly neutralise the Sunset Clause
• Publish a Trade Policy Strategy document ensuring cross-departmental goals are incorporated on social, human rights, and environmental goals
• Introduce a new due diligence law on business, the environment and human rights
• Ensure that there are no more trade deals that contain the ISDS mechanisms

ABColombia is not the only voice calling for a trade strategy that integrates social and environmental policy, industry is also keen to see this, “[sustainable growth] must also enable us to play our part in mitigating climate change and creating a nature positive economy. This includes leveraging our natural capital in ways that restore – not deplete – its biodiversity, and value” Confederation of British Industry