🔗 Share this article

Can you perceive our system of government functions? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that was how it once functioned. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. They are open only to businesses based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, potentially billions.

These sums constitute not actual losses but funds the panel members conclude the company would perhaps have made. The state could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? Sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions enacted by elected bodies is that this stipulation has been incorporated – without public consent, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the former government had approved. Today, this victory faces being overturned by an secret arbitration panel accountable to exclusively the corporations petitioning it.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK imposed on him subsequent to the war in Ukraine. He has started suing a small nation with similar intent, demanding $16bn: equivalent to half of state's annual revenue. Included in the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this matter accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. Recently, fossil fuel and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP