🔗 Share this article

Can you understand our system of government functions? It could be something like this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, or the billionaires who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these panels allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises operating from this country. Access is granted solely for entities registered abroad.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The government could be forced to drop the legislation. It is discouraged from enacting future policies along the same lines, worried about being sued.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as firms learn from each other, and private equity bankroll lawsuits for a share of a share of the takings. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings taken by parliaments is that this clause has been written – without public consent, and often in a climate of total confidentiality – inside trade treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the previous administration had approved. Currently, this success is under threat by an offshore tribunal accountable to only the entities bringing the case.

Last August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. Recently a arbitration panel in the United States was set up to hear it.

This firm is suing the UK for the money it might have made if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government enacts a policy, the domestic court validates it, then a international entity contests it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK enacted against him following the war in Ukraine. He has previously started suing another European state for this reason, claiming sixteen billion dollars: half that nation's annual revenue. Among the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these scenarios were not possible. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this issue accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “as corporations grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has now materialised. Recently, fossil fuel and resource corporations have lodged a historic level of cases against nations rich and poor, contesting – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Corporations have to date won vast sums via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP