🔗 Share this article

How do you perceive our system of government functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. However, that was how it used to work. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. Access is granted only to businesses based overseas.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it can award damages of vast sums, even billions.

These awards represent not actual losses but funds the tribunal officials determine the company would perhaps have made. The government may have to abandon its policy. It becomes discouraged from passing future laws in that area, worried about being sued.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The consequence? National sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions enacted by legislatures is that this clause has been inserted – without public consent, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the permission the former government had granted. Today, this success could be compromised by an secret arbitration panel answering to only the entities petitioning it.

Last August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. Recently a arbitration panel in the United States was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this might be. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the high court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case at present, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him after the war in Ukraine. He has already started suing Luxembourg with similar intent, claiming $16bn: equivalent to half of nation's yearly income. Among the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these scenarios could not occur. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. In the current period, fossil fuel and mining firms have filed a historic level of cases against nations rich and poor, challenging – like the example of the UK mine – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP