Corporate courts, formally known as the Investor-State Dispute Settlement (ISDS), allow corporations to sue governments in secret tribunals when public policies allegedly harm their profits. These cases have been used to attack climate action, environmental protections, and labour rights, forcing governments to either pay out millions in compensation or abandon progressive policies altogether.
Overview
Corporate courts are included in over 3,000 international trade and investment agreements, granting foreign investors the power to challenge government decisions outside of national legal systems.
As of 2023, corporations have been awarded more than $100 billion in compensation through ISDS rulings, money that is often taken from public budgets intended for social services, infrastructure, and climate action. Even when governments successfully defend themselves, they still face legal costs which average $5 million per case. Corporate courts “regulatory chill,” where governments hesitate to introduce new policies for fear of triggering costly lawsuits.
Despite growing global opposition, the UK has more than 80 treaties in place which contain provision for these corporate courts..
Concerns & risks
Corporate courts undermine national sovereignty and democracy by granting foreign investors an exclusive legal channel that is unavailable to domestic businesses, individuals, or communities. This creates a two-tier legal system where multinational corporations can challenge government decisions in a way that local businesses and citizens cannot.
The system disproportionately benefits large corporations, particularly in the fossil fuel and extractive industries, by allowing them to challenge regulations aimed at environmental protection. Countries that have attempted to phase out coal, impose taxes on mining companies, or introduce stricter environmental impact assessments have been sued for billions under ISDS. The UN’s Intergovernmental Panel on Climate Change has warned ISDS could be used to block urgent climate policies, further delaying the transition away from fossil fuels.
Additionally, corporate courts are highly secretive and prone to conflicts of interest. The arbitrators deciding these cases often have financial ties to the same corporations that bring disputes, raising serious concerns about impartiality. Unlike domestic legal systems, ISDS tribunals lack democratic oversight and are not required to consider the broader public interest when making their rulings.
Case study: UK – Colombia BIT
The UK-Colombia Bilateral Investment Treaty (BIT) includes the corporate courts mechanism, exposing Colombia to costly legal disputes initiated by UK-based investors. Over the past decade, Colombia has faced 23 ISDS claims, three of which were filed by UK companies. Many of these cases have sought to contest government efforts to protect the environment and Indigenous rights at the expense of large-scale mining and fossil fuel extraction..
As of 2024, pending corporate court claims against Colombia exceeded $13 billion, equivalent to over 13% of the government’s annual budget. This financial strain diverts vital resources away from social services, infrastructure, and environmental protection. The Colombian government is eager to renegotiate the UK BIT to get rid of corporate courts.
The UK has an opportunity to align its trade policy with its commitments to human rights and environmental action. The initial 10-year term of the UK-Colombia BIT ended in October 2024, offering a window for both governments to work together to terminate the treaty. Without action, the agreement will automatically extend indefinitely.
TJM’s position & recommendations
ISDS has no place in a fair and democratic trade system. The UK must:
- Work with Colombia to terminate the BIT.
- Make a clear commitment to excluding ISDS from any trade and investment agreements.
- Announce a government-led review of existing agreements containing corporate courts to establish whether they align with the government’s policy priorities and exploring possibilities for renegotiating or terminating them.
Trade policy should protect people and the planet, not corporate profits.
Global ISDS tracker
A new ‘Global ISDS tracker’ website tells how ISDS is delaying climate action and threatening our future.
