🔗 Share this article

What is your perceive our system of government functions? Perhaps something like this. We elect MPs. They vote on bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Today, international firms, and the oligarchs that control them, can sue nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including companies based in this country. The door is open exclusively to entities based overseas.

If a tribunal rules that a government measure may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums represent not tangible damages but compensation the arbitrators decide the company could potentially have made. The state might be compelled to rescind the measure. It is hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as corporations learn from each other, and private equity finance suits for a share of a cut of the settlements. The outcome? Sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions enacted by elected bodies is that this clause has been written – without public consent, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge determined that proposals to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government later cancelled the licence the previous administration had issued. Today, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Who is serving as its counsel challenging the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a foreign company challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, married to the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – state efforts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP