🔗 Share this article

What is your reckon our political system functions? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that was how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. The door is open exclusively to businesses based overseas.

If a tribunal determines that a government measure might diminish the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These awards are based not on tangible damages but money the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It will be discouraged from enacting future policies along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as companies observe each other, and investment funds finance suits for a share of a portion of the takings. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings taken by legislatures is that this clause has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the licence the Tories had approved. Currently, this victory could be compromised by an offshore tribunal answering to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the United States was convened to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have no idea how much this sum represents. What legal team is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company disputes it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the arbitration process to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously started suing a small nation with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly income. Among the legal team on his side? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Threats

The public was told that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this matter labelled critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That threat has now materialised. This year, fossil fuel and resource corporations have lodged a unprecedented number of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to stop environmental catastrophe. Firms have to date won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP