🔗 Share this article

Can you reckon our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

Today, international firms, along with the billionaires that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it may order financial penalties of vast sums, potentially billions.

These sums are based not on real financial harm but money the panel members decide the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as corporations 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 now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings made by legislatures is that this stipulation has been incorporated – absent public approval, and often in conditions of profound opacity – within bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government then withdrew the consent the former government had issued. Now, this victory is under threat by an foreign court accountable to no one but the entities filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. Citizens have little idea how much this might be. Which individual is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he may employ the tribunal to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: half that government’s annual revenue. Among the lawyers on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that these scenarios wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” An expert on this matter described campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “once firms begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP