Addressing the Systemic Risks of Investor-State Dispute Settlement (ISDS) to Climate Action
Informal Note, 5 June 2026
By Daniel Uribe Terán, Lead Programme Officer, Sustainable Development and Climate Change Programme, South Centre
The current international investment agreement (IIA) framework, featuring over 2,200 treaties with Investor-State Dispute Settlement (ISDS) mechanisms, acts as a structural barrier to the implementation of key aspects of the Paris Agreement. By protecting fossil fuel investments, those treaties create significant financial risks that may induce “regulatory chill,” deterring states from implementing necessary climate mitigation measures. Recent rulings from the International Court of Justice, the Inter-American Court of Human Rights, and the European Court of Human Rights have affirmed states’ sovereign rights to regulate for climate action, providing new legal tools to challenge the ISDS status quo. However, these judicial developments do not eliminate litigation risks or guarantee favourable outcomes. Consequently, states must pursue systemic reform, including treaty modernisation, the termination of outdated IIAs, the implementation of comprehensive climate carve-outs, and restrictions on forward-looking damages. Addressing these legal barriers at upcoming forums like the 64th sessions of the United Nations Framework Convention on Climate Change (UNFCCC) Subsidiary Bodies (SB 64) is essential to align international investment law with the existential imperative of a low-emission transition.
The First Conference on Transitioning Away from Fossil Fuels: Reclaiming Multilateralism for a Just Transition
Informal Note, 28 April 2026
By Daniel Uribe Terán
The First Conference on Transitioning Away from Fossil Fuels, co-hosted by Colombia and the Netherlands, serves as a necessary platform for reclaiming multilateralism for a just transition. This paper analyses how the conference addresses the ‘judicialization’ of climate obligations following landmark 2025 advisory opinions from the International Court of Justice (ICJ), the International Tribunal for the Law of the Sea (ITLOS), and the Inter-American Court of Human Rights (IACtHR). It highlights critical barriers facing developing countries, specifically the ‘regulatory chill’ caused by Investor-State Dispute Settlement (ISDS) mechanisms and the ‘debt-fossil fuel trap’ that binds extractive economies to external risks. It also recognises that integrating the ‘People’s Summit’ outcomes into the official Conference could promote a reparative financial model and strengthen the principle of Free, Prior, and Informed Consent (FPIC). Ultimately, Santa Marta should provide a blueprint for systemic reform, ensuring that global decarbonisation respects resource sovereignty and human dignity while moving toward a coordinated, legally backed effort for collective survival.
Input for the Special Rapporteur on the Right to Development
For the 2026 thematic reports to the Human Rights Council on “Participation in development” and to the United Nations General Assembly on “Peace for development”
South Centre
April 2026
The South Centre has submitted its latest input to the UN Special Rapporteur on the Right to Development for the 2026 thematic reports on “Participation in Development” and “Peace for Development”.
Our report underscores that development is not a charitable concession but an inalienable human right. To overcome the structural violence of the current international order, we advocate for:
Reforming the Global Architecture: Democratising the Bretton Woods institutions and the UN Security Council to rectify the historical underrepresentation of Africa, Latin America, and Asia.
A “Human Rights Economy”: Transitioning from voluntary corporate “tick-box” exercises to a Legally Binding Instrument (LBI) that ensures extraterritorial accountability for transnational corporations.
Dismantling “Regulatory Chill”: Reforming the Investor-State Dispute Settlement (ISDS) system, which currently prioritizes corporate profits over the policy space needed for development and climate justice.
A Paradigm Shift to “Positive Peace”: Redirecting a portion of the $2.7 trillion global military expenditure toward the SDGs and grant-based climate reparations.
Substantive Justice: Recognising traditional and indigenous knowledge as valid evidence in policy-making and ensuring reparative justice for historical dispossessions.
Input for the Working Group on the Rights of Peasants and Other People Working in Rural Areas
Report on Peasant Territories on Land and Sea
South Centre
February 2026
The South Centre has officially submitted its inputs to the UN Working Group on the Rights of Peasants and Other People Working in Rural Areas for their upcoming thematic report on “Peasant Territorialities of Sea and Land.”
Our submission emphasises that realising the rights recognised in the UN Declaration on the Rights of Peasants (UNDROP), particularly Article 17, depends on a fundamental shift in how “territory” is legally understood and economically managed.
The South Centre focuses on:
How territory must be conceptualised as a socio-ecological space where cultural identity and sustainable production intersect, not merely as a financial asset.
The dangers of “Blue Economy” industrialisation and “Green Grabbing,” where conservation mechanisms like carbon offsets displace local communities.
How States should recognise collective tenure rights and protect agrarian reform from Investor-State Dispute Settlement (ISDS) challenges.
Climate finance must support peasant agroecology, not displace the very people who steward the land.
The Constitutional Shield: How Colombia’s Judiciary Shapes Investment Treaties Through Joint Interpretation
By Daniel Uribe Teran
This policy brief examines an innovative judicial approach by the Colombian Constitutional Court in response to an increase in investor-state dispute settlement (ISDS) claims. The Court introduced a doctrine called ‘conditional constitutionality’ (exequibilidad condicionada), which mandates the executive to negotiate binding joint interpretative declarations prior to ratifying an International Investment Agreement (IIA). This process aims to clarify ambiguous language and ensure that IIA provisions align with constitutional principles, particularly concerning the sovereign right to regulate and the protection of human and environmental rights.
The analysis examines the “constitutional shield” doctrine established by this domestic mechanism, emphasising its legal basis in Article 31.3(a) of the Vienna Convention on the Law of Treaties. However, it highlights a significant discrepancy: the uncertain acknowledgement of these subsequent agreements within the international investment arbitration framework. The brief notes that arbitral tribunals, which often function as autonomous legal systems, may not consistently respect such domestic constitutional provisions. This creates ongoing tension between national sovereignty and arbitral independence. The policy brief concludes by addressing the limitations of relying solely on domestic solutions and calls for systemic reforms at the international level, such as within the United Nations Commission on International Trade Law (UNCITRAL) Working Group III.
Advancing Responsible Foreign Investment through a Legally Binding Instrument on Transnational Corporations and Other Business Enterprises
By Daniel Uribe Terán
Foreign Direct Investment (FDI) presents a complex dynamic, offering potential economic growth while posing significant risks of human rights abuses and environmental degradation. This policy brief considers that current voluntary frameworks, such as Economic, Social, and Governance (ESG) and voluntary due diligence standards, are insufficient to protect human rights, as they primarily focus on mitigating investor financial risk rather than preventing actual harm. Furthermore, the international investment regime, particularly the Investor-State Dispute Settlement (ISDS) mechanism, systemically undermines States’ sovereign right to regulate in the public interest. ISDS cases often penalise governments for enacting environmental, labour, and human rights protections, creating a “regulatory chill” that prioritises corporate profits over social welfare. The proposed Legally Binding Instrument (LBI) on business and human rights is presented as a necessary response to establish mandatory, enforceable obligations for corporations. This includes robust Human Rights Due Diligence (HRDD) and legal liability mechanisms, thereby rebalancing the system to ensure corporate accountability and align investment with sustainable development goals.
Inputs to Inform the Thematic Report of the Special Rapporteur on the Promotion and Protection of Human Rights in the Context of Climate Change to the Human Rights Council 59th session
South Centre
February 2025
The South Centre calls for a Just Transition away from fossil fuels, centering the rights of marginalized communities & the principle of common but differentiated responsibilities.
Inputs to the Expert Mechanism on the Right to Development Study on Climate Justice, Sustainability, and the Right to Development
February 2025
The South Centre inputs to the Expert Mechanism on the Right to Development Study on Climate Justice, Sustainability, and the Right to Development makes a call for upholding Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC) in ensuring a just transition, protecting the human rights of the most affected populations and reforming Investor-State Dispute Settlement (ISDS) mechanisms that threaten climate action.
Contract-based Arbitration: Lessons Learned from Bolivia’s Extractives Industries
By Daniel Uribe Teran
Bolivia has undergone a significant shift in its approach to investment dispute resolution, moving away from reliance on Bilateral Investment Treaties (BITs) and international arbitration towards domestic mechanisms and contract-based arbitration. This shift, driven by a desire to assert greater state sovereignty over natural resources, seeks to align dispute resolution with national development priorities while reducing the costs associated with international arbitration. The recent Shell Bolivia Corporation v. YPF Bolivia case highlights the complexities inherent in contract-based arbitration within the extractive sector, emphasizing the need for meticulous contract drafting and a clear definition of arbitrable disputes within the framework of Bolivian law.
This article analyses Bolivia’s transition from reliance on international investment treaties and arbitration to a domestic, contract-centred approach for resolving disputes in its extractive industries. The article examines how the legal framework adopted by Bolivia highlights the role of contract-based arbitration in addressing disputes related to investment, production, technology transfer, environmental and social impacts, labour relations, and contract interpretation. The article draws lessons from other developing countries’ experience, recommending that Bolivia further strengthen its investment framework by adopting clear protection standards, prioritizing fair administrative procedures, and emphasizing domestic remedies. This approach seeks to balance attracting responsible investment with protecting state sovereignty and promoting sustainable development in Bolivia’s extractive industries.
South Centre inputs to the Secretary-General’s synthesis report on opportunities, best practices, actionable solutions, challenges and barriers relevant to a just transition and the full realisation of human rights for all people
December 2024
A just transition requires urgent action! The South Centre calls for increased climate finance, reform of Investor-State Dispute Settlement (ISDS), and upholding Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC) to ensure a sustainable and equitable future for all.
Ensuring A Balanced Approach in UNCITRAL Working Group III
co-organized by Gobierno de Colombia, Diplomatische Akademie Wien, Universidad Externado de Colombia, and the South Centre
Views from the Global South on the Multilateral Investment Court and Procedural and Cross-cutting Issues in Investor-State Dispute Settlement (ISDS) Reform.
24 September 2024
Diplomastiche Akademie Wien,
Festsaal, Favoritenstrasse 15a,
1040 Vienna, Austria
