🔗 Share this article

What is your perceive our democratic process operates? Perhaps along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, or the oligarchs that control them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises operating from this country. Access is granted solely for entities based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but compensation the panel members conclude the company might otherwise have made. The state might be compelled to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as firms observe each other, and investment funds finance suits for a share of a share of the takings. The outcome? National sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the rulings enacted by legislatures is that this provision has been inserted – absent public approval, and often in conditions of total confidentiality – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the High Court. The justice determined that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Currently, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations petitioning it.

During August, a company whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him after the war in Ukraine. He has already initiated proceedings against another European state for this reason, demanding a colossal sum: an amount representing half government’s annual revenue. Included in the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these scenarios were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” A consultant on this matter labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations begin to understand the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. Recently, fossil fuel and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – government attempts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP