🔗 Share this article

How do you understand our democratic process works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

Today, international firms, or the billionaires that control them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, potentially billions.

These awards constitute not actual losses but funds the panel members determine the company might otherwise have made. The state may have to drop the legislation. It is hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the decisions taken by elected bodies is that this stipulation has been written – without public consent, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The new government later cancelled the licence the previous administration had issued. Now, this victory faces being overturned by an secret arbitration panel answering to no one but the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. Recently a tribunal in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to proceed. We have no idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a international entity disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to challenge the penalties the UK levied against him after the war in Ukraine. He has already started suing a small nation on these grounds, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events wouldn’t happen. In 2014, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations grasp the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and resource corporations have filed a historic level of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have thus far won $114bn through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP