🔗 Share this article

What is your perceive our democratic process works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Yet, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, or the billionaires that control them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for entities registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it may order compensation of vast sums, potentially billions.

These awards are based not on tangible damages but compensation the panel members determine the company could potentially have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws along the same lines, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as firms learn from each other, and private equity fund legal actions in return for a share of the takings. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions made by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge determined that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Now, this victory faces being overturned by an offshore tribunal accountable to no one but the corporations filing the suit.

During August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was convened to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no idea how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the high court validates it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the panel on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers representing him there? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen state funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that these events wouldn’t happen. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That threat has come to pass. Recently, energy and extraction companies have lodged a historic level of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP