🔗 Share this article

Can you perceive our democratic process works? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires behind them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these panels grant no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including businesses operating from this country. Access is granted solely for entities based overseas.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but funds the tribunal officials conclude the company might otherwise have made. The government may have to abandon its policy. It is discouraged from passing future laws in that area, for fear of being sued.

A System Running Rampant

Unprecedented levels of cases are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a share of the awards. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions enacted by elected bodies is that this clause has been written – absent public approval, and frequently under conditions of profound opacity – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the high court. The justice determined that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The Labour government then withdrew the permission the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to only the entities petitioning it.

Last August, a firm whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The administration enacts a policy, the high court supports it, then a international entity contests it through an secretive private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it seems likely that he may employ the arbitration process to contest the penalties the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: half that nation's annual revenue. Part of the counsel 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 leveraging immobilised state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments could be blocking the funds Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “as corporations start to realise the influence they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, oil and gas and mining firms have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – government attempts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP