Pandemic Could Lead to More Investor-State Lawsuits

Foreign investors may sue states for covid-19 responses

By Eileen Schuhmann | Presbyterian Hunger Program

Most governments worldwide have had to take historic measures to slow the spread of Covid-19 to protect the health of its populations, as well as employ fiscal remedies to lessen the economic impacts of those actions.

Much of the world is just now emerging from some form of lock-down where businesses were shuttered, and people were mostly confined to their homes.

In order to slow the spread of Covid-19, many states implemented some form of a lock-down, preventing people from: gathering en masse, traveling, leaving homes, going to school and work.

The economic impacts have been severe. Many businesses may not be able to recover financially and may never reopen. Hundreds of millions of jobs have been lost globally.

States have provided tax relief, deferred mortgage and rent payments, distributed food aid, subsidized wages, cancelled utility shut-offs, and many other actions to reduce the economic impact of Covid-19.

In order to protect health, many states have provided free healthcare to Covid-19 patients and in some cases even temporarily nationalized private hospitals when public hospitals were overburdened. Governments have manufactured testing kits, personal protective equipment, hand sanitizer, ventilators, and other equipment to respond to the pandemic.

Many countries have banned the exports of food products and medicines that could potentially serve as Covid-19 treatments to ensure supply for its citizens. Many governments are also trying to control the prices of medical supplies and drugs and issuing compulsory licenses to override patents to produce drugs and other medical supplies.[i]

Many of the drastic Covid-19 response measures enacted by states could be in violation of trade treaties. Many of today’s trade agreements include investor-state dispute settlement (ISDS) clauses that allow corporations to sue governments to recoup lost profits, including future profits, when the government institutes policies that violate their rights.

Since corporate profits are very sensitive to environmental protections, public health laws, tax laws, etc., lawsuits can easily emerge. These lawsuits are considered within special international tribunals and decisions on the case are made based on the rules of the trade agreement rather than on the country’s constitution or domestic laws.

One of the biggest complaints regarding ISDS is that it essentially prioritizes the profit rights of corporations over the democratic rights of citizens.

These protections granted to foreign investors could permit multinational corporations to recover profits lost due to government policies implemented to deal with Covid-19 by suing governments under the ISDS.[ii]

The Presbyterian Hunger Program, through the Joining Hands initiative, has witnessed the impact of ISDS on our partners in La Oroya, Peru where residents have suffered from lead poisoning by a US investor-owned metallic smelter. The corporation, Renco Group Inc., sued the government of Peru in 2011, under the terms of the U.S.-Peru free trade agreement, for $800 million (expected revenue losses) after the government enforced environmental regulations. Fortunately, the compensation was not awarded to Renco Group, Inc. this time.

“[The General Assembly of the Presbyterian Church (USA)] demand[s] that all trade agreements incorporate workers rights, human rights, food safety, and environmental standards, and that they allow governments and sovereign indigenous peoples to regulate corporations to protect the common good (Minutes, Part I, 2003, p. 618).”

If multinational corporations bring forth lawsuits due to Covid-19 profit losses, governments that are already in financial distress, trying to meet the urgent needs of their citizens, may really dive deeper into debt and economic depression.

We should ask ourselves why corporations should essentially be the only ones granted “immunity” in a global pandemic while hardworking citizens are left to pay the price.

We should continue to work to eliminate ISDS clauses from future trade agreements to protect people and the environment and ensure democracy.



The work of the Presbyterian Hunger Program is possible thanks to your gifts to One Great Hour of Sharing.


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