Keystone XL: Company sues for USD$15 billion through ISDS corporate court

November 25: The company behind the Keystone XL oil pipeline has formally begun legal proceedings to sue the US government for USD$15 billion through an Investor-State Dispute Settlement (ISDS) provision in the North American Free Trade Agreement (NAFTA).

After US President Joe Biden revoked the permit for the pipeline in January 2021, the fossil fuel company TC Energy threatened to take legal action under NAFTA. Now, TC Energy has filed a request for arbitration, saying “TC Energy has a responsibility to our shareholders to seek recovery of the losses incurred due to the permit revocation.”

The USD$15 billion claim makes this one of the largest ISDS cases in US history. Despite limitations on the use of ISDS in the revised United States-Mexico-Canada Agreement (USMCA) (formerly NAFTA), arbitration is still permissible for some legacy investments.

Previously, TC Energy had used the trade agreement to launch its lawsuit in 2016 after President Obama cancelled the project’s permit, but the claim was withdrawn when the permit was restored under President Trump.

The pipeline was long criticised for its impacts on First Nations communities and the environment, and trade justice advocates argue that the case shows the potential use of ISDS clauses to stall action on climate change and environmental protection.

The role of ISDS in blocking action on climate change was highlighted during the COP26 discussions in November, with campaigners at Global Justice Now warning that the fossil fuel sector can use ISDS “to hold climate action to ransom. These companies have made unfathomable profits from fuelling the climate crisis, we cannot let them demand even bigger pay-outs."

According to Global Justice Now, there are five current cases against climate action brought by fossil fuel companies, with the claims amounting to USD$18 billion. They include:

  • The German energy giant Uniper suing the Netherlands through the Energy Charter Treaty (ECT) for $1 billion after it decided to phase out coal, and the British company Rock
  • The UK company Rockhopper is suing Italy through the ECT for $324 million over a ban on offshore oil drilling close to the coastline
  • The UK company Ascent Resources is suing Sovenia for requiring an environmental impact assessment on fracking plans