In advance of the global climate negotiations taking place in Egypt, several countries announced important actions to curb the power of the fossil fuel industry.

For decades now, a global web of international investment agreements has given corporations excessive powers to block government policies they don’t like. Through “investor-state dispute settlement” mechanisms, these agreements grant corporations the right to sue governments in unaccountable supranational tribunals, demanding huge payouts in retaliation for actions that might reduce the value of their investments. Corporations are able to file such lawsuits over a wide array of government actions — including actions designed to protect people and the planet.

Poland, Italy, France, the Netherlands, and Spain have now announced they will withdraw from one of these anti-democratic agreements: the Energy Charter Treaty, a 1991 pact signed by about 50 countries. The ECT offers special protections to oil, gas, and mining corporations and energy companies, undermining governments’ abilities to address climate change.

These countries’ rejection of the Energy Charter Treaty is welcome, but much more needs to be done. The United States is not a member of the ECT, but the U.S. government has been a major driver of the investor-state system, insisting on including such corporate powers in dozens of trade agreements and bilateral investment treaties and only partially rolling back some of these rules in recent years.

Altogether, the nearly 3,000 free trade and investment treaties across the globe that include ISDS clauses have led corporations to file lawsuits against governments totaling many billions of dollars. And that’s just the cases we know about. Many of these suits remain secret.

With climate negotiators meeting in Egypt, more than 350 organizations in more than 60 countries have issued a joint letter calling on governments to get rid of the investor-state dispute settlement (ISDS) system altogether.

As the letter explains, the key risks posed by the ISDS system are: 1. Increased costs for governments to act on climate if corporations are able to claim exorbitant amounts of taxpayer money through an opaque lawsuit system of supranational courts, and 2. “regulatory chill,” which may cause governments, out of fear of being sued, to delay or refrain from taking necessary climate action, a phenomenon seen in the past.

Manuel Pérez-Rocha is an Associate Fellow at the Institute for Policy Studies. Twitter: @ManuelPerezIPS

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