Fossil fuel abolition in international law and arbitration

Fossil fuels have long been regarded as natural resources that States may freely exploit. That right is now limited by the prospect of State responsibility for fossil fuel exploitation, affirmed by the International Court of Justice in its 2025 advisory opinion on climate change. This Analysis examines the Court’s unanimous guidance on fossil fuels, as well as the more precise guidance in joint and separate declarations on the phasing out of production, consumption, licensing, and subsidies. Then it considers how States may defend phase-out measures in investor-State dispute settlement (ISDS) proceedings. Drawing an analogy with slavery and other harmful industries that were lawfully abolished without needing to pay full compensation, it examines a range of measures that may be defended in investment arbitration and the possible relevance of climate law in commercial arbitration. It concludes by observing a disparity between international legal developments and the expansion of the oil and gas industry.