Triple Pundit | 13 April 2026
Panama’s copper crisis: What a $20b lawsuit says about investor power
by Andrew Kaminsky
Public outrage and mass protests shut down Central America’s largest copper mine two years ago. In 2025, the Panamanian government was coerced back to the negotiating table by a $20 billion lawsuit from the mining company, First Quantum Minerals, despite the fact that the project’s contract was ruled unconstitutional in 2017, and again in 2023.
This type of lawsuit from a foreign company against a government is called an investor-state dispute settlement (ISDS), and it plays out in international arbitration court. First Quantum Minerals’ case against Panama is a prime example of how ISDS provisions in international trade agreements can limit a country’s sovereignty and leave them vulnerable to exploitation.
The risk of international lawsuits has countries backing out of trade agreements with ISDS provisions, while international law experts suggest alternative methods to ensure that foreign investment works for all parties. Some worry this could turn mining companies, and the economic benefits they bring, away. But most studies find that the presence of ISDS provisions has little impact on foreign direct investment, anyway.
What’s happening in Panama?
To oversimplify a very complex topic, ISDS is a type of protection for foreign investors. If they feel the government of a country they are investing in does something that may reduce their returns, they can sue that government in international arbitration court. (We have an in-depth explanation of ISDS, how it’s used, and why countries are backing out in our previous coverage here.)
Even if the foreign investment project breaks domestic laws, harms communities or destroys the environment, governments that try to remedy or prevent those issues with changes in legislation can face lawsuits in the billions. That’s how Panama wound up staring down the barrel of a $20 billion lawsuit.
“The [Panama] mine was allowed to start with an unconstitutional contract. If that doesn’t tell you this is a risky project as an investor, I don’t know what does,” said Jamie Kneen, national program co-lead at MiningWatch Canada. “But ISDS helps investors override that kind of concern. It essentially de-risks otherwise extremely risky investments.”
The Cobre Panama mine, run by Canadian-based First Quantum Minerals, is the largest copper mine in Central America. Operating from 2019 to 2023, it accounted for about 5 percent of Panama’s GDP.
Despite being declared unconstitutional in 2017, it wasn’t until mass protests five years later that the Supreme Court ruled the mine must be shut down. A few months later, First Quantum launched an ISDS case against Panama. Now that Panama is entertaining contract renegotiation in light of the case, First Quantum paused the lawsuit. The mine seems set to resume some operations, but Panama will make a decision on whether to fully reopen the mine this summer.
“The company and a number of its investors and suppliers are threatening to sue the pants off of Panama to make up for lost profits or to pressure the government into ignoring its people and restarting the mine,” said Jen Moore, associate fellow at the Institute for Policy Studies.
This raises questions about the benefits of ISDS for governments. Critics of ISDS argue that disputes can be resolved in other ways and host countries don’t need ISDS to attract investment.
Does ISDS actually attract investment?
Proponents of ISDS claim that having these provisions in trade agreements entices foreign investment by providing a safety net for investors against government maltreatment.
“ISDS provisions boost investor confidence by offering legal protection against expropriation or discriminatory acts,” said Attorney Davy Karkason, founder of Transnational Matters International Law Firm. “My foreign direct investment clientele rely on these provisions for risk mitigation.”
But the data on the influence of ISDS provisions on foreign direct investment does not paint a clear picture.
A 2022 study by the United States International Trade Commission found that binding ISDS provisions result in an increase of foreign investment by 22 percent, but it concedes that evidence in the literature continues to be mixed with little consensus.
Meanwhile, a 2020 meta-study on investor protections in international investment agreements found that the effect on foreign investment was, “so small as to be considered zero.”
“Even if there is a marginal correlation in some cases, the costs of ISDS — financially, legally and politically — are significant and woefully underappreciated,” said Lisa Sachs, director of the Columbia Center on Sustainable Investment.
Politically, ISDS can cause “regulatory chill,” where governments avoid enacting environmental, social or tax laws for fear of costly ISDS lawsuits.
“Most of the time, mining executives’ decisions are made based on the nature of the resource, the legal and regulatory frameworks, and the certainties around development,” explained Kneen of Mining Watch Canada. “ISDS coverage comes out as kind of a bonus point, but not a crucial decision making factor.”
Based on the Panama situation, I ran a rudimentary analysis to see what changed in foreign direct investments when other countries removed ISDS clauses from trade agreements. Here are three of those cases.
Ecuador
In 2017, Ecuador terminated 16 trade agreements after their government determined ISDS provisions were not attracting investment.
In the following five years, Ecuador received $1 billion per year in foreign direct investment, compared to $830 million annually in the five years prior, according to data from Macrotrends. While many factors affect foreign investment, the termination of ISDS-laden agreements did not appear to deter it.
ISDS clauses may have helped attract investment initially when they were first introduced in 1993, but once investment was established in Ecuador, the removal of ISDS clauses did not deter additional investment.
South Africa
South Africa let several ISDS treaties expire in the early 2010s and replaced them with its own national program called the Protection of Investment Act in 2018. The act still provides some investor protection, but now cases are heard within South Africa’s own legal system, not international arbitration in Washington.
In the five years preceding 2012, when South Africa started to distance itself from ISDS, its average annual foreign direct investment inflows were $6.4 billion, according to data from Macrotrends. From 2012 to 2016, foreign direct investment averaged $4.5 billion per year.
Since South Africa enacted its national investor protection act in 2018, foreign direct investment averaged $5.1 billion annually. (This omits $41 billion of foreign investment in 2021, which was largely the result of corporate restructuring.)
Again, many factors affect these investments. After cancelling ISDS treaties, South Africa’s foreign direct investments dropped at first, then climbed back up after enacting the national protection program.
India
After facing multiple billion-dollar ISDS cases in the 2000s, India terminated over 50 trade agreements in 2016 and 2017. In the five years preceding the 2016 changes, India saw $33.5 billion in annual foreign direct investment inflows, according to data from Macrotrends. In the five years following, that increased to $48.3 billion.
In two of these three cases, removing ISDS clauses was not followed by reduced investment. In one country, it was. This inconclusivity is in line with what larger academic studies find. Whether ISDS attracts investment or not is up for debate, but the financial and political costs that countries face from the ISDS system likely outweigh any boost to foreign investment.
How to make foreign investment work for all parties
“Instead of relying on ISDS, we need more balanced and mutually beneficial investment frameworks — ones that support sustainable development and fair dispute resolution,” said Sachs of the Columbia Center on Sustainable Investment.
The International Institute of Sustainable Development recently released a report that provides recommendations on how to improve foreign investment agreements. It includes rewriting or ending old agreements that prioritize investor protections and refinding and processing minerals domestically.
Processing and refining minerals domestically adds more suppliers to the market and derisks concentrated global supply chains from external shocks and geopolitical market manipulation, said Isabelle Ramdoo, director of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development.
“Keep in mind that if you remove ISDS, investors still have recourse. They have national courts and regional courts that can play that role,” said Suzy Nikièma, an author of the report and director of sustainable development at the International Institute of Sustainable Development.
In fact, many international law experts say that domestic courts should be the place to settle investor-state disputes, while others worry that domestic legal systems may not be equipped to handle them.
“Domestic courts, particularly in developing countries, have the reputation of being inefficient, weak or problematic,” Nikièma said. “But ISDS is not better. If you decide to prioritize domestic courts, you could put in the effort to improve them and make sure they can handle this type of dispute properly.”
It should be a requirement to at least start a case in domestic courts before elevating a dispute to other regional or international courts, she added.
“A final element is to bring more inclusivity in the system for local communities,” Nikièma said. “A sort of compliance mechanism is needed for communities to raise concerns about project impacts and to have a collaborative approach with the investor or state to adjust and comply with investment obligations.”
