🔗 Share this article

What is your reckon our democratic process works? It could be along the lines of this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Nowadays, foreign corporations, or the billionaires who own them, can sue governments for the regulations they pass, at offshore tribunals composed of business advocates. The cases are conducted in secret. Unlike our courts, these tribunals provide no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

These sums constitute not actual losses but compensation the arbitrators conclude the company would perhaps have made. The state might be compelled to rescind the measure. It is deterred from introducing similar legislation in that area, worried about facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The consequence? Democratic sovereignty and democracy are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings taken by parliaments is that this stipulation has been incorporated – without public consent, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice determined that plans to open the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The incoming administration later cancelled the permission the previous administration had issued. Currently, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a company whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no clear indication how much this might be. Who is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it appears probable that he may employ the tribunal to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Part of the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package 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 democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these scenarios wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An expert on this issue accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies begin to understand the power they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of cases against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP