Linkedin | June 2025

by Lisa Sachs - Director, Columbia Center on Sustainable Investment & Columbia Climate School MS in Climate Finance

Costa Rica is facing a multi-million dollar lawsuit for protecting its environment and its communities - and following the law.

A Canadian company is threatening private arbitration under the Canada–Costa Rica investment treaty, claiming Costa Rica violated the treaty by halting a landfill project in Turrúcares, even as the proper domestic legal process is unfolding.

Here are the facts:

The proposed landfill has faced public opposition for 15 years (https://lnkd.in/eHSZGUEK). Permits were granted in 2011—allegedly in under 24 hours and without required impact assessments. Residents and local authorities challenged the project through the proper processes in domestic courts, citing environmental risks and regulatory plans that prohibit such developments. The legal proceedings are ongoing. The mayor has even indicated that compensating the company, if necessary, could be an outcome of the proper domestic processes.

Yet the company, EBI, is now threatening Costa Rica with international arbitration - an adhoc private dispute settlement mechanism - bypassing the domestic processes and domestic stakeholders and undermining Costa Rica’s sovereignty and public policy. This is not new - investor-state dispute settlement (#ISDS) has become a tool for foreign investors to sue governments when public interest measures affect their profits — often successfully (the cases are heard by private arbitrators with a vested interest in this ISDS system).

Over 3,000 treaties around the world contain these outsized protections and the ability to sue in private arbitration. Countries, municipalities and communities around the world face this same risk, with more and more cases filed every year - sometimes for billions of dollars. Most often, these threats of arbitration happen behind closed doors, without public knowledge - so governments’ hesitation to regulate, their overriding communities, and favoring private interest may all be in response to these extremely costly threats. This affects governments’ measures related to public health, public security, affordable public services, critical mineral governance, tax justice, and more.

Costa Rica is doing exactly what we need more governments to do: listen to citizens, follow environmental law, and let legal processes run their course.

We urgently need a new investment governance regime - that supports states’ ability to govern in the public interest and that addresses the real challenges that undermine SDG-supporting investments. Current investment treaties and ISDS do the opposite and have no legitimate purpose.