🔗 Share this article

How do you understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. However, that was how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, along with the oligarchs behind them, can sue nation states for the regulations they pass, at offshore tribunals staffed by business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, including enterprises operating from this country. The door is open only to entities registered abroad.

If a tribunal finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but compensation the arbitrators determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation in that area, for fear of facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being filed, as firms take cues from each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? National sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions enacted by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The new government later cancelled the consent the Tories had granted. Now, this victory faces being overturned by an foreign court reporting to exclusively the entities petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no clear indication how much this could amount to. What legal team is representing it challenging the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK enacted against him after the war in Ukraine. He has started suing Luxembourg on these grounds, claiming $16bn: half that state's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An expert on this topic accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That equates to the combined GDP