🔗 Share this article

What is your understand our political system operates? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, along with the billionaires that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these panels grant no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. They are open only to corporations operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

This compensation represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The state may have to abandon its policy. It becomes discouraged from passing future laws along the same lines, worried about being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as corporations observe each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? Sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The justice determined that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had approved. Today, this success is under threat by an offshore tribunal reporting to no one but the corporations filing the suit.

In August, a company whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. Who is representing it in opposition to the state? A sitting MP, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Among the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal upon trade deal and there has not been a issue in the past.” An adviser on this issue described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has now materialised. This year, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to prevent global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP