🔗 Share this article

Can you understand our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

Today, foreign corporations, and the wealthy individuals who own them, can sue governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies headquartered in this country. Access is granted solely for businesses registered abroad.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but money the tribunal officials decide the company could potentially have made. The government might be compelled to rescind the measure. It will be hesitant to enacting future policies along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as firms learn from each other, and investment funds finance suits for a share of a portion of the takings. The result? Sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices enacted by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under conditions of total confidentiality – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had issued. Today, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this could amount to. Who is acting on its behalf in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him after the Russian aggression. He has initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half nation's annual revenue. Among the lawyers representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that such things were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” A consultant on this issue labelled campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with general mockery.

That prediction has come to pass. In the current period, oil and gas and resource corporations have filed a unprecedented number of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Firms have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP