🔗 Share this article

What is your reckon our political system operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the billionaires behind them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises headquartered in this country. They are open solely for businesses registered abroad.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The government may have to drop the legislation. It will be discouraged from enacting future policies in that area, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions in exchange for a portion of the settlements. The result? Democratic sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices enacted by elected bodies is that this provision has been written – without public consent, and typically amid conditions of total confidentiality – within international trade agreements.

A Concrete Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The judge determined that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no consequence on national carbon targets. The new government then withdrew the licence the previous administration had granted. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the corporations bringing the case.

In August, a company whose final controllers are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. Who is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an secretive private court, and a elected official represents its behalf.

The Russian Case

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the arbitration process to challenge the restrictions the UK imposed on him following the Russian aggression. He has previously started suing a small nation with similar intent, claiming a colossal sum: half that state's annual revenue. Included in 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 utilising seized oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that such things could not occur. Previously, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this issue described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear such legal actions. Predictions that “when companies begin to understand the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That threat has come to pass. Recently, fossil fuel and mining firms have lodged a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to prevent global warming. Corporations have thus far won $114bn through ISDS, of which oil majors have secured the majority. That represents the combined GDP