Greetings, Overseas Magnates and Firms! Please Come and Litigate Against the UK for Billions.
Can you reckon our political system works? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that used to be how it used to work. No longer.
The Advent of Secret Arbitration Panels
Today, foreign corporations, along with the wealthy individuals behind them, can sue elected administrations for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies based in this country. The door is open solely for businesses registered abroad.
Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.
These awards represent not actual losses but compensation the arbitrators conclude the company could potentially have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about facing litigation.
A Mechanism Spiralling Out of Control
Historically high figures of cases are being brought, as corporations learn from each other, and hedge funds finance suits in exchange for a portion of the takings. The result? National sovereignty and democratic governance are becoming unaffordable.
The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the rulings taken by elected bodies is that this clause has been written – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.
A Concrete Case: The Cumbrian Coalmine
Last year, activists won a great victory at the High Court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government then withdrew the consent the Tories had approved. Today, this success is under threat by an foreign court answering to no one but the corporations bringing the case.
In August, a corporate entity whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.
This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to proceed. The public has no clear indication how much this sum represents. Who is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the high court supports it, then a overseas corporation challenges it through an secretive private court, and a sitting MP represents its behalf.
A Sanctions Lawsuit
On the same day that the court on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against Luxembourg with similar intent, seeking $16bn: an amount representing half government’s annual revenue. Among the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.
Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine desperately needs.
Empty Promises and Escalating Costs
Politicians promised that these events wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms begin to understand the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.
That threat has come to pass. This year, oil and gas and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP
