Breaking Barriers: Integrating Energy Justice to Overcome Investor-State Dispute Settlement (ISDS) Roadblocks to Climate Change Mitigation Efforts

This chapter examines the relationship between investment, energy security, and the investor-state dispute settlement (ISDS) regime, an area often overlooked in energy justice conversation. The ISDS regime, designed to safeguard foreign investments, faces a legitimacy crisis exacerbated by its perceived misalignment with climate change mitigation efforts. Through the lens of energy justice, this chapter explores the criticisms against the ISDS regime by framing them as “energy injustices”. Distributive injustices manifest in unfair cost allocation, favouring investors over just transition efforts and placing a disproportionate burden on developing nations. Restorative injustices arise from the potential for opportunistic claims and excessive compensation claims, hindering the just transition. Cosmopolitan injustices occur when tribunals fail to address human and environmental rights issues in investment disputes. The chapter proposes that the ongoing reforms of the ISDS regime be guided by energy justice principles, emphasising equitable cost-sharing, clear criteria for damages, and integrating human and environmental rights into investment agreements. Aligning reforms with energy justice principles can help legitimise the regime, ensuring it plays an effective role the transition to a low-carbon economy and contributing to global energy justice.