🔗 Share this article

Can you perceive our political system functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Advent of Secret Tribunals

In the modern era, overseas companies, along with the oligarchs behind them, are able to litigate against nation states for the regulations they pass, at private courts made up of business advocates. Such disputes take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open exclusively to corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These sums constitute not real financial harm but funds the tribunal officials conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being initiated, as firms learn from each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices enacted by parliaments is that this stipulation has been written – without democratic mandate, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the High Court. The presiding officer determined that proposals to dig the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Today, this success could be compromised by an foreign court reporting to no one but the entities petitioning it.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this might be. What legal team is acting on its behalf challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The state passes a law, the high court validates it, then a foreign company contests it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it seems likely that he’ll use the arbitration process to fight the penalties the UK enacted against him after the Russian aggression. He has previously filed a claim against a small nation for this reason, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these scenarios could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An expert on this matter described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. This year, oil and gas and resource corporations have lodged a record number of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have thus far won $114bn through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP