🔗 Share this article

What is your understand our political system works? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that was how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

Today, foreign corporations, or the oligarchs who own them, can sue nation states for the policies they pass, at private courts staffed by corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises based in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it may order damages of vast sums, potentially billions.

These sums constitute not tangible damages but compensation the panel members decide the company could potentially have made. The state might be compelled to abandon its policy. It will be deterred from passing future laws along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms take cues from each other, and investment funds finance suits in exchange for a cut of the takings. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions taken by legislatures is that this provision has been inserted – absent public approval, and frequently under conditions of profound opacity – into trade treaties.

A Concrete Case: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge found that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The new government then withdrew the consent the previous administration had granted. Currently, this victory faces being overturned by an secret arbitration panel accountable to exclusively the corporations petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot the MP. The administration passes a law, the high court supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he will utilise the tribunal to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, seeking sixteen billion dollars: half that government’s yearly budget. Among the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that such things were not possible. Years ago, a government leader, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “when companies grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning is now a reality. Recently, energy and mining firms have lodged a record number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Corporations have to date won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP