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How do you reckon our system of government operates? Maybe along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation is maintained by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, overseas companies, and the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises based in this country. They are open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but funds the tribunal officials conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to enacting future policies of a similar nature, worried about being sued.

A System Running Rampant

Record numbers of legal actions are being initiated, as firms learn from each other, and private equity fund legal actions in return for a cut of the settlements. The result? National sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge found that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the consent the previous administration had granted. Now, this victory faces being overturned by an secret arbitration panel reporting to exclusively the companies petitioning it.

Last August, a company whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Recently a tribunal in the US capital was convened to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. The public has no idea how much this might be. What legal team is serving as its counsel challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a international entity contests it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Challenge

Concurrently that the court on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: half that nation's yearly income. Included in the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that these events could not occur. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this issue labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “once firms start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has come to pass. Recently, energy and extraction companies have initiated a record number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – official measures to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP