Public Services in the Crosshairs: The impacts of the investment protection regime on the sector in Latin America

Public Services in the Crosshairs: The impacts of the investment protection regime on the sector in Latin America

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The report, produced by the Transnational Institute (TNI), coordinated by Public Services International (PSI) and funded by the Friedrich Ebert Stiftung (FES), exposes the risks that the Investor-State Dispute Settlement (ISDS) mechanism implies for the Public Services in Latin American and Caribbean countries.

Latin America and the Caribbean is the region with the second highest number of investment protection treaty claims before arbitration tribunals in the world, and one third of these are related to public services. In Argentina and Bolivia, more than 60% of their ISDS claims are related to the services sector.

What is ISDS?

It is a mechanism embedded in Bilateral Investment Treaties (BITs) and Free Trade Agreements (FTAs). ISDS allows foreign investors to sue states before international arbitration tribunals if they believe that measures taken by the state violate the protections they have under a treaty - including public interest policies such as in the areas of health, energy, water, environment, and labour.

The most affected public service is energy supply, followed by telecommunications. 72% of the claims already settled in these cases ended in a decision that benefited investors and states were ordered to pay out more than $3.901 billion.

While the promise of BITs is to encourage foreign investment, there is no direct relationship between more BITs and more foreign investment, while the danger to sovereign state action is very high, affecting governments' possibilities to take policy measures that put the common good at the centre and ensure the proper functioning of public services.

This report aims to provide elements for debate, while analysing examples of states that have already modified or even terminated their investment protection treaties, such as Bolivia, Ecuador, Indonesia and South Africa. The findings of the report can support trade union and civil society organisations in defence of quality public services to require their governments not to sign new trade agreements and/or to audit their existing agreements to exit the ISDS system.

Key points of the report

  • With 327 ISDS claims until the end of 2021, Latin America and the Caribbean is the second most sued region before arbitration tribunals globally on the basis of investment protection treaties. One third of the claims, more specifically 102, are related to public utilities.

  • In Argentina and Bolivia, the utilities sector is strongly targeted by foreign investors. More than 60% of their ISDS claims are related to this sector.

  • In almost ¾ of the claims related to the utilities sector that have already been settled, the investor has benefited and the states have been ordered to pay out more than $3.9 billion.

  • While the promise of BITs is to encourage foreign investment, there is no direct link between more BITs and more foreign investment, while the danger to sovereign state action is very high, affecting governments' possibilities to take policy measures that put the common good at the centre and ensure the proper functioning of public services.