Series Reveals a Shadowy, Pro-Industry Corner of International Law

What if companies and foreign investors frustrated with environmental and public health regulations could sue governments and win billion-dollar payouts financed by taxpayers?

That’s exactly what has been happening through an obscure international arbitration system called investor-state dispute settlement. Tucked into thousands of international agreements and contracts for oil projects, mines and more, the ISDS system gives foreign businesses formidable rights. As our series “Cashing Out” details, fossil fuel companies have used ISDS to file legal claims against governments around the globe that enact regulations to phase out oil, gas and coal. Through arbitration, the companies are seeking—and sometimes winning—hundreds of millions to billions of dollars to compensate for projected lost profits. 

We pursued this series after a tip by an official who works inside the system. ISDS, the source indicated, is rife with conflicts of interest and producing unjust outcomes through questionable proceedings. Tracking the complex demands, we found that companies won big financial compensation even after they flouted national laws, polluted the environment or were accused of violating human rights. 

Through 12 articles published over two years, we revealed that much of the arbitration process is conducted behind closed doors. Although ISDS was set up to deal with the most egregious types of government actions affecting foreign investors, these international arbitration panels have ruled against nations simply for enacting their own regulations that companies have argued hurt their expectations for profit. Notably, governments have no right to sue foreign investors in ISDS. Only companies can initiate claims. And shockingly, lawyers who work as arbitrators in one case can switch roles in another, working as counsel for the same companies. 

To pursue the series, we traveled to three countries in Latin America and spoke with government officials, academics and activists across five continents. We drew on thousands of pages of court documents and public records in the United States, France, Ecuador, Denmark, Honduras and other countries as well as World Bank arbitration pleadings and corporate securities filings.

Some members of local communities affected by claims told us they had never heard of ISDS. Others were angry that the corporations that had polluted their land had recourse through an international justice system far more powerful than anything accessible to local people. And some were frustrated that they had no way to participate in the secret arbitrations taking place in far-flung cities like Washington, Paris and London.  

Our series revealed how Wall Street firms fund some companies’ ISDS cases to reap a share of the awards. In addition to profiting from a system weighted in favor of corporations, their involvement also drives up the number of claims, our reporting found. One academic described this as “pouring kerosene into a fire.” Another dubbed it a “wealth extraction mechanism.” Much of this third-party litigation funding is done in secret.

“Cashing Out” won honors for its reporting, including from the Society of Professional Journalists, the Society for Advancing Business Editing and Writing, the Deadline Club, the New York Press Club, the Overseas Press Club and the Society of Environmental Journalists. SEJ described the body of work as a “lucid, accessible narrative that achieved significant real-world impact.”

Articles from the series were republished by Wired, Grist, Mother Jones, El Tiempo Latino, Canada’s National Observer and more. Politicians, academics and activists circulated the stories widely, increasing awareness of ISDS. 

The Biden administration, weeks before leaving office, took a rare step to limit the scope of ISDS claims in an existing treaty with Colombia. The administration acted under pressure from some members of Congress as well as advocates.