Can you perceive our system of government operates? Perhaps along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. Not anymore.
Nowadays, foreign corporations, and the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including enterprises based in this country. They are open solely for corporations operating from foreign soil.
When a secret court rules that a government measure could harm the corporation’s projected profits, it may order financial penalties of vast sums, even billions.
This compensation constitute not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of being sued.
Record numbers of cases are being filed, as firms take cues from each other, and hedge funds fund legal actions for a share of a portion of the takings. The outcome? Democratic sovereignty and democratic governance are becoming unaffordable.
This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices enacted by legislatures is that this clause has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – inside trade treaties.
A year ago, activists secured a significant win at the high court. The presiding officer found that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had approved. Now, this victory is under threat by an foreign court answering to only the corporations filing the suit.
During August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Recently a arbitration panel in the United States was established to hear it.
The claimant is litigating against the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.
Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case to date, but it is highly possible that he may employ the arbitration process to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, claiming $16bn: equivalent to half of government’s annual revenue. Among the counsel representing him there? a prominent lawyer, wife of the former British prime minister.
Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.
We were assured that these scenarios wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.
That threat has come to pass. In the current period, fossil fuel and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP
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