Washington, DC and Bogotá ― The Center for Economic and Policy Research (CEPR) applauds the decision announced yesterday that the Colombian government will exit the investor-state dispute settlement (ISDS) system, which allows corporations to sue governments over lost “future profits” when the companies argue that regulations impede or prevent their planned projects. Several CEPR economists and legal experts, signed an open letter to Colombian President Gustavo Petro earlier this week, and CEPR was one of several organizations that convened a conference on Tuesday on the ways that ISDS impedes regulations to protect the environment, workers, and public health.

“We are glad to see Colombia joining Brazil, South Africa, India, Indonesia, Ecuador, Bolivia, and several European countries that have recently moved away from ISDS in trade and investment agreements,” CEPR Director of International Policy Alex Main said. The US-Mexico-Canada Agreement, which the first Trump administration negotiated to replace NAFTA, also eliminated ISDS between the US and Canada, and narrowed it in regard to Mexico.

The Petro administration’s announcement comes a month before Colombia is set to cohost the First International Conference on Transitioning Away from Fossil Fuels in Santa Marta, from April 24 to 29.

ISDS has a track record of heavily favoring multinational corporations at the expense of governments and local communities. In the letter sent to Petro on Monday, 220 economists and legal scholars warned that “ISDS allows foreign corporations to bypass domestic courts and bring legal claims against host governments before special international arbitration tribunals that routinely award vast sums for alleged harms to their investments. ISDS is asymmetrical by design, granting foreign investors expansive protections that are unavailable to domestic businesses or citizens of the host country.”

The letter signers, who included Joseph Stiglitz and Thomas Piketty, noted that under Petro, Colombia “has halted new fossil fuel exploration contracts and advanced an ambitious energy transition agenda. Yet, Colombia has 129 oil and gas projects that are covered by ISDS provisions, exposing the country to claims in the billions of dollars.”

The letter notes that Brazil, which no longer participates in ISDS, is “South America’s largest recipient of foreign investment.”

On Tuesday, Colombian officials Irene Velez, Minister of Environment and Sustainable Development; and Senator (and presidential candidate) Clara López joined economists Ha-Joon Chang and Andrés Arauz; and legal and international trade experts, including Melinda St. Louis, Ladan Mehranvar, Daniel Rangel, and María Angélica Prada at the conference in Bogotá hosted by professors Enrique Prieto and Rafael Tamayo of Universidad del Rosario titled “Investment Arbitration and the Just Energy Transition: Colombia at a Crossroads.”

“We applaud President Petro’s announcement,” Mario Osorio, Research Fellow at CEPR, said. “We hope that Colombia will now help to lead other countries in exiting ISDS and pursuing alternatives that will allow for environmental, public health, and other regulation of foreign investment. As economists and legal experts noted this week, ISDS has too often stood in the way of needed measures to mitigate climate change. By leaving ISDS behind, Colombia is taking an important step toward being able to transition away from fossil fuels.”

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