🔗 Share this article

What is your perceive our political system works? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at private courts composed of business advocates. The cases are held in secret. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even enterprises operating from this country. They are open only to businesses registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

These awards constitute not actual losses but funds the panel members determine the company could potentially have made. The administration could be forced to drop the legislation. It will be deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Running Rampant

Record numbers of legal actions are being initiated, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings enacted by legislatures is that this clause has been written – absent public approval, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal accountable to only the corporations petitioning it.

During August, a company whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is litigating against the UK for the money it might have made if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Who is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the penalties the UK imposed on him after the war in Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: half that nation's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events were not possible. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this issue described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That threat has now materialised. In the current period, energy and extraction companies have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the Whitehaven project – official measures to prevent global warming. Firms have so far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP