🔗 Share this article

What is your perceive our system of government works? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, along with the billionaires that control them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses based in this country. They are open solely for businesses based overseas.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These awards constitute not real financial harm but funds the tribunal officials decide the company might otherwise have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as firms take cues from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? Sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices taken by legislatures is that this provision has been inserted – without public consent, and often in conditions of total confidentiality – within bilateral investment treaties.

A Real-World Example: The UK Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the former government had approved. Currently, this victory is under threat by an secret arbitration panel accountable to no one but the entities filing the suit.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was set up to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had received permission to commence operations. We have no idea how much this sum represents. What legal team is representing it challenging the state? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he’ll use the tribunal to contest the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation for this reason, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Included in the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has now materialised. Recently, oil and gas and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to stop global warming. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP