In Atlas Shrugged, the man in Bedroom F, Car No. 13 of the doomed Taggart Comet was a lawyer who had said, “Me? I’ll find a way to get along under any political system.”
This particular passenger may well have been correct in his estimate of his own abilities and, had he survived the Winston tunnel disaster, would probably have been very much at home in the new, Randian, world of John Galt. After all, Galt’s famous, and famously long, address to the American people, ended with the words …
“The only proper functions of a government are: the police, to protect you from criminals; the army, to protect you from foreign invaders; and the courts, to protect your property and contracts from breach or fraud by others, to settle disputes by rational rules, according to objective law.”
The nature of that ‘objective law’ is made only too clear in the book’s final pages, where we are told that a…
“… rectangle of light in the acres of a farm was the window of the library of Judge Narragansett. He sat at a table, and the light of his lamp fell on the copy of an ancient document. He had marked and crossed out the contradictions in its statements that had once been the cause of its destruction. He was now adding a new clause to its pages: “Congress shall make no law abridging the freedom of production and trade . . .”
How would that have worked out in practice? We have, in today’s real world an example of just such a legal system. It is called the Investor State Dispute Settlement System or ISDS, and the disputes on which it adjudicates are increasing in number every year. What this system does is give foreign and multinational companies the right to sue governments that introduce legislation they don’t like. The cases are heard in courts specifically set up for that purpose, and adjudication is in the hands of arbitrators whose backgrounds suggest inbuilt bias in favour of the corporate world. Paragraph 3(d) of the Annex to Article 9.22.6. of the ISDS Code of Conduct in relation to the Trans-Pacific Partnership provides that …
“Upon selection, an arbitrator shall refrain, for the duration of the proceeding, from acting as counsel or party-appointed expert or witness in any pending or new investment dispute under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or any other international agreement”
but this applies only during that particular case. There is nothing to prevent arbitrators from going off and acting on behalf of one of the parties in a separate case as soon as the dispute is over. Since they are exactly the sort of people who would have the skills needed to do just that, the temptation to rule in favour of a potentially lucrative client must be rather overwhelming. In a complex case between a Hungarian energy company and the Croatian state, the suggestion that at least one of the arbitrators in one of the numerous tribunals involved was subject to such bias has actually been made. The former prime minister who negotiated the deal was later arrested on allegations of bribery and was found guilty and sentenced by a series of Croatian courts, but that did not prevent a succession of tribunals from upholding a deal that was manifestly not in Croatia’s interests. Judge Narragansett would have been proud of such an outcome!
A unique feature of many ISDS cases has been the claims are made by companies not only to recoup expenditures made under an agreement or concession that was subsequently revoked, but also to compensate, sometimes very considerably, for notional profits not made. In many such cases the state had been moved to act because of health or environmental concerns, a useful catalogue and summary having been presented at a conference on ‘A New Era for IDR: Breaking the Stronghold of International Arbitration’, held on 8 April 2024 in Singapore. This makes very clear the extent to which states can be blackmailed into making some payment rather than face the costs and uncertainty of continued defence. What is, inevitably, not documented is the extent to which states may hesitate to implement necessary legislation for fear of finding themselves facing an ISDS court.
Increasingly, calls for reform are being heard, but is that even possible? Should not caveat emptor apply to international companies in their dealings with the governments of nation states?
Postscript: Just two days after this blog was first posted, an article appeared in the Guardian about a case being filed against the UK government by been filed by Woodhouse Investment Pte Ltd, a Singaporean company, and West Cumbria Mining (Holdings) Limited. Woodhouse Investment holds 80% of West Cumbria Mining and is itself owned by a firm in the Cayman Islands. Bizarrely, but predictably,given his track record, the companies are being represented by the lawyer and Conservative MP Geoffrey Cox
Surely it is time this sort of thing was stopped.