🔗 Share this article

Can you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, international firms, and the oligarchs that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses based in this country. The door is open only to businesses registered abroad.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards constitute not actual losses but money the arbitrators conclude the company could potentially have made. The government may have to drop the legislation. It will be deterred from enacting future policies along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as firms take cues from each other, and investment funds fund legal actions in return for a share of the takings. The outcome? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the former government had granted. Currently, this legal outcome could be compromised by an foreign court reporting to exclusively the entities petitioning it.

Last August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. Last week a arbitration panel in the United States was established to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this might be. Who is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary supports it, then a foreign company challenges it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it seems likely that he may employ the tribunal to challenge the restrictions the UK levied against him after the Russian aggression. He has previously started suing a small nation on these grounds, claiming $16bn: half that state's annual revenue. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

The public was told that such things were not possible. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this matter labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have thus far won vast sums via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP