🔗 Share this article

What is your reckon our system of government operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Yet, that was how it operated in the past. No longer.

The Advent of Shadow Tribunals

In the modern era, international firms, and the billionaires that control them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels allow 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 businesses operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These sums are based not on actual losses but money the arbitrators conclude the company would perhaps have made. The administration may have to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and hedge funds fund legal actions in exchange for a portion of the takings. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the decisions taken by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – inside international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice found that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on national carbon targets. The Labour government later cancelled the permission the Tories had approved. Today, this success could be compromised by an secret arbitration panel reporting to only the entities filing the suit.

In August, a company whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was established to adjudicate on it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. Citizens have little idea how much this could amount to. Who is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The state enacts a policy, the national judiciary upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it seems likely that he may employ the tribunal to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of government’s yearly budget. Part of the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen state funds as security for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Risks

Politicians promised that such things were not possible. Previously, a government leader, championing the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this issue described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That prediction is now a reality. In the current period, oil and gas and resource corporations have lodged a record number of suits against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to prevent global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That represents the combined GDP