RCEP Must Keep ISDS Out for the Sake of Climate Action

This statement was delivered during the Public Forum on “The Challenges of a Just Energy Transition in International Trade and Investment Agreements” held on August 12 at the Faculty of Law, Universitas Indonesia (UI), and also served as a response to the 14th RCEP Joint Committee Meeting held on August 11–12 in Manila, Philippines. The RCEP General Review is set to commence in 2027, and the RCEP Joint Committee meeting will finalize the scoping agenda for this review, including upgrades to existing provisions to facilitate supply chain resilience and green trade.

Global uncertainty has positioned ASEAN as a target for investment within the global energy supply chain—given the region's abundant reserves of key raw materials for clean energy technologies—particularly for major external partners such as China, Japan, and South Korea. Consequently, RCEP cooperation creates an avenue for investment expansion that is likely to lead to intensified resource extraction and the privatization of energy.

Rachmi Hertanti, a Researcher at Transnational Institute (TNI), explains that the ISDS mechanism in the RCEP will only exacerbate inequality by granting special rights and full protection to multinational corporations that are profiting from the expansion of energy transition projects in the region. “The billion-dollar lawsuits hamper the realization of a just energy transition due to the potential compensation for investor losses and impact on states’ fiscal capacity. ISDS lawsuits have become direct challenges to states’ ability to pursue climate action, including fulfilling national net-zero commitments, exercising sovereignty of natural resources, protecting the environment, ensuring public access to affordable energy, and maintaining fiscal capacity to finance the transition”.

Currently, RCEP’s investment chapter does not include ISDS. However, there was a commitment to “enter into discussions” of ISDS within two years of RCEP’s entry into force. A decision on whether and how to adopt an ISDS mechanism now expected around 20271. Olisias Gultom, Coordinator of Indonesia’s Economic Justice Coalition (MKE) explains: The RCEP and AANZFTA have been in force for several years, and during this time the global and national contexts have undergone significant changes. Economic justice for the people must remain the core pillar to be upheld, prioritised over corporate profit-seeking interests. The Investor-State Dispute Settlement (ISDS) mechanism must be discontinued and removed from both RCEP and AANZFTA, as Indonesia and Australia in particular have proven to be overwhelmed in addressing these challenges.

Attack on Net Zero Commitments 

Coal phase-out has already given rise to the risk of ISDS lawsuits. Approximately 257 coal-fired power plants worldwide still have an economic life span and are at risk of stagnation due to foreign ownership, of which 75% (192 plants) are protected by at least one ISDS agreement.2 In RCEP, this includes 88% of foreign-owned coal plants in Indonesia, 71% in China, 85% in Vietnam, 30% in Philippines and 86% in Australia.3

Meliana Lumbantoruan, Deputy Director of Publish What You Pay (PWYP) Indonesia explains:
“As Indonesia navigates the complex transition away from coal and strives to achieve its net-zero commitments, the government cannot allow ISDS to become a quiet veto over our climate policies. With 88 percent of Indonesia’s foreign-owned coal capacity already covered by investment treaties, every sovereign decision to limit coal operations, strengthen emissions standards, or pursue a managed phase-out could expose the state to costly investor claims, a hidden legal bill that may ultimately fall on the public budget. A genuinely Just Energy Transition must not force the state to pay twice: first to finance the shift to clean energy, and again to compensate fossil fuel investors for stranded assets. The public deserves to understand these potential costs before RCEP governments decide on the future of ISDS. The RCEP General Review should therefore not reopen the door to ISDS. Indonesia must preserve its policy space to phase out coal, protect public finances, and invest in a just energy transition.”

Masayoshi Iyoda,  350.org Japan Campaigner says: 

“Coal and fossil companies are using this onerous trade provision to silently block progress on the just energy transition. People are already being forced to pay a high price for fossil fuels through energy bills, subsidies and climate costs — we don’t need more public money going to fossil giants through dispute settlement. We need to make polluters pay, not be compensated.”

Attack on Environment and Indigenous Territories

Numerous mining permits that have been revoked on environmental grounds and/or to protect indigenous peoples' rights have subsequently been reinstated due to the threat of ISDS lawsuits. 

Adam Wolfenden, Pacific Network on Globalization (PANG), Fiji:  

“ISDS has shown that it doesn't care for environmental protections as a legitimate government action. Yet ISDS is included in the push to start deep sea mining through domestic legislation, private contracts, and sponsorship agreements between some Pacific Island Countries and mining companies. ISDS will embolden the investors in this new, untested and dangerous industry, while leaving the Pacific government open to being sued for millions if they are considered to breach their commitments.”

Attacks on National Sovereignty over Natural Resources

With regard to green technology production, ASEAN countries are seeking to maximise the value added from their mineral wealth through the development of intermediate processing. However, such efforts have opened the potential risk for ISDS lawsuits. 

Joseph Purugganan, Focus on The Global South - Philippines: “ASEAN is at the center of this global rush for critical minerals to fuel the so-called green energy transition. A key question though is whether the extraction of these minerals support  the transition of developed countries rather than its own.  Governments need the policy space to pursue green industrial policy that benefits its workers, and its own development goals.  It is therefore in the best interest of the Philippines to oppose any moves to include ISDS in RCEP and new trade and investment agreements”

Attacks on Public Services

Multinational companies benefit from state-guaranteed long-term electricity purchase commitments, stipulated in Power Purchase Agreements (PPAs) under a ‘take-or-pay’ schemes. In this context, governments are expected to facilitate the energy transition through mechanisms such as Feed-in Tariffs (FiTs). However, FiTs for renewable energy have been the subject of numerous claims filed by foreign investors under investment treaties, potentially constraining governments’ ability  to ensure access to affordable energy. 

Yulo A. Lao Jr. of Public Services International Asia Pacific: “Workers are united against ISDS because democracy must come before corporate power. No government should face billion-dollar lawsuits for protecting workers, communities, the climate, or public services including affordable and clean energy. PSI will continue building global worker solidarity to challenge ISDS and secure the policy space needed to deliver justice, equality, and quality public services for all.”

Attacks on Fiscal and Public Budget

The ISDS lawsuits filed by mining, oil and gas companies are posing a serious risk to public budgets and climate financing, as case awards can amount to as much as 11.5% of national GDP’s, as was the case with Venezuela in ConocoPhillips v Venezuela. Looking at the energy transition cases to estimate the costs for states as a percentage of financing required to fund an energy transition in their countries, Australia and the Philippines are at most risk. 

Chien yen Goh, Third World Network: “ISDS awards directly jeopardise governments' ability to manage public finances for their people: deepening fiscal deficits, undermining debt sustainability, and diverting scarce financial resources to satisfy such claims rather than toward addressing environmental challenges and meeting their SDG commitments”

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For further information, please contact:

Rachmi Hertanti, Transnational Institute: r.hertanti@tni.org 

Olisias Gultom, Sahita Institute – Coordinator of Koalisi Keadilan Ekonomi: olisias@gmail.com 

Meliana Lumbantoruan, PWYP Indonesia: meliana@pwypindonesia.org