hDo you understand the workings of our political system? Maybe something like that. We elect Members of Parliament. They vote on bills. If a majority is obtained, bills become laws. Courts have upheld the law. End of story. Well, that’s how it worked. Not now
Today, foreign corporations, or their owners who own them, can sue governments for these laws in offshore tribunals staffed by corporate lawyers. Cases are kept confidential. Unlike our courts, these tribunals do not grant a right of appeal or judicial review. You or I cannot bring a case to them, nor can our government, or any business located in this country. They are only open to overseas corporations.
If a tribunal determines that a law or policy could compromise a corporation’s expected profits, it can award hundreds of millions, even billions, in damages. This amount does not represent actual damages, but the arbitration company decides Otherwise has made The government may have to abandon its policy. For fear of being sued, future laws along similar lines will be discouraged from being passed.
Record numbers of lawsuits are being brought, as corporations learn from each other, and hedge funds learn in exchange for taking on finance suits. The result? Sovereignty and democracy are becoming unsustainable.
This process is known as “Investor State Dispute Settlement” (ISDS). Allowing the override of domestic law and the decision of Parliament is that this provision is written into trade agreements – without public consent, and often in terms of the utmost secrecy.
A year ago, Friends of the Earth won a landslide victory in the High Court. The judge ruled that for 30 years in the UK, Whitehaven, in Cumbria, had been illegally approved by the Conservative government, which accepted the outlandish claim that the mine would have no impact on our carbon budget. The Labor government then withdrew the concession to the Tories. This victory can now be compromised by a foreign tribunal that has been requested by anyone other than corporations.
In August, a company whose ultimate owners are based in the Cayman Islands filed a claim against the UK government. A tribunal was set up to hear him in Washington DC last week.
The company is suing Britain for the money it would have made if the mine had been allowed to go ahead. We don’t know how much it could be. Who is representing him against the British government? The great patriot Geoffrey Cox, MP for Torridge and Tavistock, and former Attorney General in the Conservative government. The government makes a decision, the High Court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.
On the same day (November 18) that the tribunal on the Kolmine case was set up, we learned from a parliamentary response that the UK was also being prosecuted under ISDS by Russian oligarch Mikhail Friedman. We don’t know anything about the case yet, but it looks like he will use the tribunal to challenge the sanctions Britain imposed on him after the invasion of Ukraine. They have already launched a lawsuit against Luxembourg for this reason, demanding $16bn (£12.1bn): half the government’s annual income. Among the lawyers representing them? Cherie Blair, wife of former British Prime Minister.
Legal experts believe./Luxembourg Russia Bilateral Investment Treaty. This extraordinary, undemocratic power against elected governments could prevent Ukraine from desperately needing it.
We were assured that such things would not happen. In 2014, David Cameron, promoting the biggest and most dangerous of all such agreements, told us: “We’ve signed trade deal after trade deal and there’s never been a problem in the past.” The House of Lords adviser on the issue, Professor Denis Novy, accused campaigners that “in reality, ISDS doesn’t affect the UK very much”. The overall message seemed to be that only poor countries need fear these lawsuits. I warned of the general sarcasm that “as corporations begin to realize their power, they will shift their focus from weak countries to strong ones”.
This threat has now materialized. This year, fossil fuel and mining firms have filed a record number of suits against rich and poor countries alike, as in the case of the Cumbrian coal market – as governments try to curb climate change. Corporations have so far won £114bn (£86bn) through ISDS, of which fossil fuel companies have received £84bn (£64bn). That is equal to the combined GDP of the world’s 45 smallest economies. The average payment received by these companies is $1.2bn (10 910M). In some cases they threaten to suck the poorest countries dry. It’s climate finance in reverse: an existential crisis can be attempted to stave off an existential crisis with massive payments from governments to fossil fuel corporations.
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These suits also have a huge chilling effect on governments that would like to go further. France, Denmark and New Zealand have put their climate ambitions on hold for fear of lawsuits, and more are on the way.
We have nothing to gain from the provisions of these agreements. A 2020 meta-study found that, when it comes to encouraging foreign investment, “the effect of international investment agreements is too small to be assumed to be zero”. A report issued by the UK government in 2013 concluded that ISDS was “highly unlikely to encourage investment” and was “likely to provide few or no benefits to the UK”.
Yet the Kerr Starr government turned a deaf ear. It is reportedly trying to push the ISDS approach into the investment treaty it is negotiating with India, and into other trade agreements it is working on. We cannot know for sure, as they are being discussed in complete confidentiality. You can almost believe there were things the government didn’t want us to see. It declined to speak to the campaigners or provide further information.
We have twice defeated efforts to expand ISD, through broad popular movements against the Multilateral Treaty on Investment and the Transatlantic Trade and Investment Partnership. Now we’ll need to mobilize again: this time against our own government, which seems to care more about foreign corporations than we do.
