🔗 Share this article

Can you perceive our democratic process functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

Today, foreign corporations, along with the oligarchs behind them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for entities based overseas.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These sums constitute not real financial harm but money the tribunal officials conclude the company would perhaps have made. The state could be forced to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of cases are being filed, as companies take cues from each other, and private equity fund legal actions for a share of a share of the settlements. The result? National sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Concrete Example: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had approved. Today, this victory faces being overturned by an foreign court accountable to only the companies filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have little idea how much this could amount to. Who is representing it challenging the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The administration passes a law, the domestic court validates it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: an amount representing half state's yearly income. Among the lawyers on his side? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal upon trade deal and there has never been a problem in the past.” A consultant on this issue accused campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies grasp the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning is now a reality. Recently, oil and gas and resource corporations have lodged a record number of suits against nations both wealthy and developing, contesting – similar to the UK mine – official measures to prevent environmental catastrophe. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP