From D.C. Across the Americas: Colombia Exits ISDS with Paola Jaimes Santamaría

Why It Matters

Leaving ISDS removes a major legal barrier to climate legislation, allowing Colombia to pursue an energy transition without fear of costly investor lawsuits, while signaling to other emerging markets that regulatory autonomy can coexist with foreign investment.

Key Takeaways

• Colombia will start withdrawing from ISDS agreements in near term
• Exit aims to reduce legal risk for climate policies
• ISDS lawsuits can delay energy transition and cost billions
• Other Latin American nations have left ISDS without investment loss
• Election outcomes may determine continuity of Colombia's ISDS exit

Summary

Colombia announced it will begin withdrawing from the Investor State Dispute Settlement (ISDS) system, a move timed just weeks before the country co‑hosts an international conference on transitioning away from fossil fuels in Santa Marta.

ISDS lets foreign investors sue governments over policies affecting their assets, often leading to protracted, costly litigation that can span years. Economists and legal scholars, including Joseph Stiglitz and Thomas Piketty, warned President Petro that such disputes threaten climate‑friendly reforms, especially as Colombia still has numerous oil and gas projects vulnerable to future claims.

The warning is grounded in recent cases such as Canadian miner Eco Oro’s ISDS suit after Colombia strengthened water‑protection rules, and mirrors actions by Brazil, Ecuador and Bolivia, which have either avoided or exited ISDS without seeing a collapse in foreign investment.

By exiting ISDS, Colombia hopes to regain regulatory freedom for its energy transition, though the legal unwind will be complex and may take years. The decision also enters a heated election cycle, meaning future administrations could reverse or reinforce the policy, shaping the country’s climate agenda and investment climate.

Original Description

Colombian president Gustavo Petro announced his country's plans to withdraw from the investor-state dispute settlement system (ISDS).

On this week's "From D.C. Across the Americas," CEPR research fellow Paola Jaimes Santamaría breaks down the decision and its global implications for the clean energy transition.