🔗 Share this article

How do you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, and the billionaires who own them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel finds that a government measure may compromise the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

This compensation represent not tangible damages but funds the tribunal officials decide the company might otherwise have made. The state may have to drop the legislation. It will be hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as companies learn from each other, and investment funds finance suits in return for a share of the settlements. The outcome? National sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings enacted by elected bodies is that this clause has been written – without public consent, and often in an atmosphere of total confidentiality – into trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The new government then withdrew the consent the previous administration had granted. Currently, this victory faces being overturned by an secret arbitration panel reporting to only the companies petitioning it.

During August, a company whose final controllers reside in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was convened to hear it.

This firm is suing the UK for the money it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. Who is representing it challenging the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The government passes a law, the national judiciary validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he may employ the arbitration process to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has started suing Luxembourg with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Part of the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Costs

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations grasp the influence bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has now materialised. This year, energy and mining firms have lodged a historic level of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP