🔗 Share this article

Can you perceive our political system operates? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it used to work. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but money the panel members determine the company would perhaps have made. The administration may have to drop the legislation. It will be hesitant to passing future laws in that area, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of total confidentiality – into bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice ruled that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the permission the previous administration had issued. Currently, this legal outcome could be compromised by an foreign court answering to only the companies petitioning it.

In August, a firm whose final controllers reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have no idea how much this sum represents. What legal team is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the court on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he will utilise the arbitration process to fight the penalties the UK imposed on him following the Russian aggression. He has already initiated proceedings against another European state with similar intent, demanding $16bn: equivalent to half of state's yearly budget. Included in the legal team representing him there? a prominent lawyer, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this topic labelled activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations grasp the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have to date won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP