🔗 Share this article

What is your perceive our system of government operates? It could be along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Today, international firms, and the oligarchs who own them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies based in this country. The door is open exclusively to entities based overseas.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards represent not actual losses but funds the arbitrators conclude the company would perhaps have made. The government may have to abandon its policy. It will be deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms learn from each other, and investment funds finance suits in return for a cut of the takings. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings made by legislatures is that this stipulation has been inserted – absent public approval, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer found that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had granted. Currently, this success faces being overturned by an secret arbitration panel accountable to exclusively the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the penalties the UK levied against him following the Russian aggression. He has filed a claim against another European state on these grounds, seeking a colossal sum: half that government’s annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these events wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” A consultant on this issue described campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about such legal actions. Cautionary notes that “when companies grasp the power they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That warning has now materialised. This year, fossil fuel and extraction companies have filed a historic level of cases against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to prevent global warming. Firms have thus far won vast sums via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP