Welcome, Overseas Tycoons and Companies! Kindly Come and Litigate Against the UK for Billions of Pounds.
How do you perceive our political system works? Maybe along the lines of this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. Well, that was how it operated in the past. Not anymore.
The Advent of Secret Arbitration Panels
Today, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to corporations based overseas.
When a secret court finds that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.
These awards represent not actual losses but money the panel members decide the company might otherwise have made. The state may have to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.
A Process Running Rampant
Unprecedented levels of cases are being initiated, as corporations learn from each other, and private equity finance suits in return for a portion of the settlements. The consequence? Sovereignty and popular rule are now prohibitively expensive.
This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by parliaments is that this provision has been written – without public consent, and often in conditions of total confidentiality – into international trade agreements.
A Real-World Instance: The UK Coal Mine
Last year, a conservation group achieved a major legal triumph at the senior court. The justice ruled that plans to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The new government then withdrew the consent the Tories had granted. Today, this victory could be compromised by an foreign court accountable to no one but the corporations petitioning it.
In August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in Washington DC was convened to hear it.
This firm is suing the UK for the money it might have made if the mine had received permission to proceed. Citizens have no idea how much this could amount to. Who is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the high court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.
An Oligarch's Challenge
On the same day that the court on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it seems likely that he may employ the tribunal to challenge the sanctions the UK imposed on him after the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, seeking $16bn: equivalent to half of government’s yearly income. Included in the legal team on his side? a prominent lawyer, wife of the former British prime minister.
Trade specialists contend that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.
False Assurances and Mounting Costs
We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this issue accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations grasp the influence they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.
That prediction has come to pass. In the current period, energy and extraction companies have initiated a record number of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have so far won $114bn via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP
