Can you reckon our system of government operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that was how it once functioned. Those days are over.
Nowadays, international firms, and the billionaires who own them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for businesses registered abroad.
When a secret court rules that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.
These awards constitute not real financial harm but funds the arbitrators determine the company might otherwise have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.
Unprecedented levels of disputes are being initiated, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The result? Democratic sovereignty and democracy are now too costly.
This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the rulings taken by parliaments is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – within international trade agreements.
A year ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had approved. Now, this legal outcome could be compromised by an secret arbitration panel answering to no one but the entities bringing the case.
In August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.
The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is representing it in opposition to the British government? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court supports it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official works for its behalf.
Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him following the war in Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: equivalent to half of state's annual revenue. Part of the lawyers on his side? the wife of a former prime minister, married to the ex-UK leader.
International law scholars believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine desperately needs.
We were assured that these scenarios wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this matter described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by general mockery.
That prediction has come to pass. Recently, fossil fuel and resource corporations have lodged a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to stop climate breakdown. Companies have to date won $114bn by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP
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