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Governments warned of spike in Covid-19-related litigations

Bereng Mpaki

GLOBAL governments, including Lesotho, must immediately take practical steps to suspend the use of investor-state dispute settlement (ISDS) in legal matters relating to the enforcement of national lockdowns in fighting the Covid-19 pandemic.

This was said by the Policy Analysis and Research Institute of Lesotho (PARIL) on Friday. PARIL has joined a call by 630 global organisations in warning governments over possible legal suits initiated by foreign investors against host governments.

The ISDS or investment court system (ICS) is a system through which investors can sue countries for discriminatory practices.

“PARIL, together with other organisations from more than 90 countries, warn that the ISDS system could be used to claim billions from governments over pandemic protections,” PARIL executive director Lehlohonolo Chefa said on Friday.

Mr Chefa said the ISDS is provided for in many trade and investment agreements that several countries have signed.

He said Lesotho has in the past experience been sued by foreign investors under similar circumstances in a case involving Swissbourgh Diamond Mines.

“That case was eventually argued in Singapore where the national interests of Lesotho including the livelihoods of the Basotho could easily be brushed aside. These cases are time consuming, expensive and take away resources that could otherwise be used in fighting Covid-19.

“Any case that could be filed against Lesotho for enforcing lockdown, reducing trading hours and waiver of certain fees or payment for services would be adding salt to insult in a country that is already struggling to provide Personal Protective Equipment (PPE), whether to use Disaster Management Act or Public Health Act, testing for Coronavirus and providing food to the poor and unemployed,” Mr Chefa said.

Part of the open letter addressed to the governments reads:

“We are writing to you today to urge you to take a lead in ensuring countries around the world do not face a wave of ISDS cases arising from actions taken to tackle the Covid-19 pandemic…

“Globally, some governments are taking actions to save lives, stem the pandemic, protect jobs, counter economic disaster and ensuring people’s basic needs are met. The level of these actions has been unprecedented in modern times and the need for these actions has been clear.

“But the expansive reach of the ISDS system could open such critical government actions to claims for millions in compensation from foreign investors. The numbers of such claims could also be unprecedented and impose massive financial burdens on governments struggling under the burden of devastating health and economic crises.

“ISDS in various forms is written into many trade and investment agreements. It allows foreign investors — and foreign investors alone — to sue governments in secretive tribunals outside of the national legal system for amounts far higher than are likely to be available to them in domestic courts.

“The lawyers, who profit enormously from the ISDS system, are already fishing for corporate clients interested in using ISDS tribunals to extract large sums from governments over actions they have taken in response to the Covid-19 crisis,” the organisations said.

They said law firms, trade experts, United Nations bodies and human rights experts are already predicting an imminent wave of ISDS cases.

“Specialist law journals have speculated that: “the past few weeks may mark the beginning of a boom” of ISDS cases. Crisis situations in the past, such as the Argentine financial crisis or the Arab Spring, have led to many cases.”

The organisations said a Covid-19-related wave of ISDS cases could be immense given that of the 1023 known ISDS cases, thirteen have resulted in awards or settlements of more than US$1 billion, including for lost future profits.

“By the end of 2018, states worldwide had been ordered or agreed to pay investors in publicly known ISDS cases the amount of US$88 billion. Some developing countries have billions outstanding in pending ISDS claims.

“In order to prevent this, we urge governments to immediately and urgently take the following steps, before the first cases are brought:

  • Permanently restrict the use of ISDS in all its forms in respect of claims that the state considers to concern Covid-19-19 related measures.
  • Suspend all ISDS cases on any issue against any government while it is fighting Covid-19 crises, when capacity needs to be focused on the pandemic response.
  • Ensure that no public money is spent paying corporations for ISDS awards during the pandemic.
  • Stop negotiating, signing, and or ratifying any new agreements that include ISDS.
  • Terminate existing agreements with ISDS, ensuring that ‘survival clauses’ do not allow cases to be brought subsequently.
  • In light of threats exposed by the pandemic, comprehensively review existing agreements that include ISDS to see if they are fit for purpose,” the letter reads.

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