🔗 Share this article

How do you perceive our system of government functions? It could be something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Tribunals

Today, foreign corporations, and the oligarchs that control them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these panels grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including businesses operating from this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but money the arbitrators determine the company could potentially have made. The administration could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about being sued.

A Process Running Rampant

Record numbers of cases are being brought, as companies observe each other, and private equity finance suits in return for a portion of the settlements. The result? National sovereignty and democratic governance are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions enacted by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of total confidentiality – into international trade agreements.

A Concrete Case: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The presiding officer found that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the previous administration had granted. Now, this legal outcome could be compromised by an foreign court reporting to exclusively the companies bringing the case.

Last August, a firm whose final controllers are located in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the United States was convened to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has little idea how much this could amount to. Who is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a international entity challenges it through an undemocratic private court, and a elected official acts on its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has already filed a claim against Luxembourg with similar intent, claiming $16bn: half that state's yearly income. Part of the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that these scenarios were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this matter described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. In the current period, energy and resource corporations have filed a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to prevent global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP