The Luxembourg government is currently being sued for billions by an investor – just one case among many
Arbitration tribunals also threaten Europe’s climate and environmental goals!
Luxembourg is currently being sued for 16 billion dollars by Russian oligarch Mikhaïl Fridman. The reason: Mr Fridman is subject to EU sanctions due to the Russian invasion of Ukraine. Luxembourg has frozen his assets, leading the oligarch to demand a huge compensation payment of 16 billion dollars.
It is hard to imagine what it would mean for Luxembourg and its taxpayers if we were to lose the case.
The Fridman case shows how ISDS (Investor-State Dispute Settlement) can be used to challenge government decisions on fundamental issues such as war and peace and to undermine EU sanctions on the attack on Ukraine.
However, the Fridman affair is not an isolated case! It is just one example that now specifically affects Luxembourg. But it also illustrates a fundamental problem.
EU Member States are dangerously exposed to the risk of billion-pound lawsuits from foreign investors – through outdated bilateral investment treaties (BITs).
With more than 1,000 such agreements still in force between EU and non-EU countries, the highly controversial investor-state dispute settlement (ISDS) mechanism contained in most of them violates EU sanctions laws and continues to undermine Europe’s ability to protect national security interests, implement tax measures, pursue progressive climate and environmental policies, and safeguard democratic decision-making processes.Friends of the Earth Europe, with Mouvement Ecologique as a member, the European Trade Justice Coalition, SOMO, the Transnational Institute and Powershift are today publishing 10 ISDS case studies that show how comprehensively this mechanism threatens the right of governments to regulate and carries the risk that decisions by national courts will be overruled by EU Member States.
ISDS effectively allows foreign investors to bypass national courts and sue governments for huge sums of compensation in private arbitration tribunals, which tend to be investor-friendly. This practice not only undermines the climate and environmental policies of the EU and its Member States, but new cases show that it also increasingly poses a risk to EU sanctions against aggressive regimes and attacks Member States’ national security measures:
Some further examples:
- National security under attack: Sweden’s decision to protect its telecoms infrastructure on national security grounds has been challenged by Chinese tech giant Huawei in a lawsuit worth almost half a billion euros. Huawei has also threatened countries such as Czechia and the United Kingdom with ISDS lawsuits in the past.
- Taxation of excess profits challenged: The oil and gas company Klesch Group, registered in the tax haven of Jersey, is suing Denmark, Germany and the EU over the European excess profits tax for energy companies. This tax was adopted after these companies posted massive additional profits in 2022, while society as a whole suffered from skyrocketing energy prices. Klesch is using ISDS to effectively evade its tax liability.
- Environment in court: Australian company Berkeley is demanding up to US$1 billion from Spain for a uranium mining project that would have left a trail of radioactive waste. The licences were revoked by the Spanish Supreme Court because they violated environmental laws.
- Pressure and regulatory intimidation: Oil giants Shell and Eni used Nigeria’s investment agreement with the Netherlands to force the Nigerian government to approve their environmentally damaging projects. Shell’s original ISDS claim for $1.8 billion helped the company secure a unilateral licence for one of the country’s most productive oil fields in 2011. The deal deprived Nigeria of its share of future profits. A subsequent government bowed to further pressure following a second lawsuit and dropped corruption charges against the oil companies.
ISDS therefore continues to undermine Europe’s ability to protect national security interests, implement tax measures, pursue climate and environmental policies, and safeguard democratic decision-making processes.
Private arbitration tribunals have the power to challenge democratic decisions made by elected governments in order to protect the private profits of large companies and wealthy investors.
The EU and its Member States must abolish this obscure relic that puts profits above democracy, social welfare and environmental protection.
Mouvement Ecologique and the coalition of organisations call on the EU to ensure that Member States take the necessary measures to terminate their current bilateral investment agreements – and on EU Member States to effectively terminate them.
Mouvement Ecologique
Friends of the Earth Europe – with Mouvement Ecologique as a member – the European Trade Justice Coalition, SOMO (Centre for Research on Multinational Corporations), the Transnational Institute (international research and advocacy institute) and Powershift (association for an ecological and solidarity-based energy and global economy)
The complete dossier can be found at https://10isdsstories.org/
The 10 cases – 10 stories of how the rich and powerful hijacked justice
- Fridman v. Luxembourg
Sanctioned Russian oligarch Fridman abuses #ISDS to sue Luxembourg over frozen assets – he is demanding an incredible 16 billion dollars. While war victims go empty-handed, ISDS protects war profiteers.
It’s time to end this unjust system in Europe. - Huawei v Sweden
Huawei is suing Sweden for protecting its 5G network on national security grounds – and is demanding around $500 million via #ISDS in an agreement between China and Sweden.
With over 1,000 bilateral agreements between EU and non-EU countries, most of which contain #ISDS, this is a threat to the right of Member States to regulate. The EU must act. - Klesch v. EU, Denmark, Germany
The oil and gas company Klesch Group (registered in the tax haven of Jersey) is suing Denmark, Germany and the EU to avoid the excess profits tax for energy companies.
While people struggled with skyrocketing energy costs, they raked in huge profits – and are now using #ISDS to avoid repayments. - Berkeley v. Spain
The Australian company Berkeley is demanding $1 billion from Spain after its uranium mining project was halted due to environmental violations. A Spanish court prevented a trail of radioactive waste – now the company wants money for it. - Shell & Eni v Nigeria
Oil companies Shell & Eni are gambling with Nigeria’s future:
In 2011, Shell used a £1.8 billion ISDS lawsuit to obtain a dubious oil licence that excluded Nigeria from profits ( ). A second lawsuit forced the government to drop corruption charges. - Rio Tinto v. Serbia
In Serbia’s Jadar Valley, residents fought back against a lithium mine that threatened their land and water. After nationwide protests, the government halted the project – but Rio Tinto is now threatening a secret #ISDS lawsuit worth billions to circumvent democracy. - Andraous v. Netherlands
Businessmen diverted hundreds of millions from a pension fund in Curaçao. The courts ruled: repay. Now one of them is suing the Netherlands in a private court – he holds the central bank responsible. Will #🇳🇱 taxpayers have to pay for his losses? The next nightmare of #ISDS. - Suffolk v. Portugal
Thousands lost their savings when a major Portuguese bank collapsed and was bailed out in 2014. Now US hedge funds are suing🇵🇹 via shell companies for credit transactions – with the help of a Mauritius agreement, before secret #ISDS courts. A billion-dollar risk for taxpayers - EcoDevelopment v. Tanzania
A Swedish investor sued Tanzania over a failed sugar plantation. Through #ISDS, Tanzania had to pay more than three times the original investment. The investor even seized a government aircraft.
The bill for taxpayers - InfraRed v. Colombia
Building roads, circumventing permits, appropriating land, suing the state, collecting toll increases – this is a summary of the #ISDS lawsuit brought by a British infrastructure investor against Colombia.
⇒ The complete dossier can be found at https://10isdsstories.org/