🔗 Share this article

What is your understand our system of government functions? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies based in this country. They are open only to corporations operating from foreign soil.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums represent not real financial harm but funds the arbitrators decide the company might otherwise have made. The state may have to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the awards. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings made by parliaments is that this provision has been incorporated – absent public approval, and often in conditions of profound opacity – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The presiding officer ruled that plans to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The new government later cancelled the licence the previous administration had approved. Now, this success is under threat by an secret arbitration panel accountable to no one but the corporations bringing the case.

Last August, a corporate entity whose final controllers are based in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this might be. Who is representing it challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a international entity challenges it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it appears probable that he’ll use the tribunal to fight the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously started suing another European state on these grounds, demanding a colossal sum: half that state's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this issue labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning has now materialised. In the current period, energy and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP