🔗 Share this article

Can you reckon our political system operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that was how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. You or I are unable to file a case to them, nor can our government, or even enterprises based in this country. Access is granted exclusively to corporations based overseas.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it can award compensation of hundreds of millions, running into billions.

These awards constitute not real financial harm but funds the panel members decide the company could potentially have made. The state might be compelled to drop the legislation. It is deterred from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms observe each other, and investment funds finance suits for a share of a cut of the awards. The outcome? Democratic sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The justice found that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government later cancelled the permission the previous administration had issued. Now, this victory faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a firm whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no idea how much this might be. What legal team is representing it challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court validates it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Among the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that such things were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An adviser on this matter accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies grasp the power they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to stop global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP