🔗 Share this article

How do you understand our political system functions? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Advent of Secret Courts

Nowadays, overseas companies, and the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are held in secret. Unlike our courts, these panels grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including businesses headquartered in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

These awards constitute not real financial harm but compensation the arbitrators decide the company might otherwise have made. The state may have to abandon its policy. It becomes hesitant to introducing similar legislation in that area, worried about being sued.

A System Spiralling Out of Control

Unprecedented levels of cases are being initiated, as corporations observe each other, and hedge funds finance suits in exchange for a cut of the takings. The consequence? National sovereignty and popular rule are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The presiding officer found that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the consent the former government had approved. Currently, this success faces being overturned by an foreign court accountable to no one but the companies bringing the case.

During August, a company whose final controllers are located in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Which individual is representing it against the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it seems likely that he will utilise the tribunal to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, demanding $16bn: an amount representing half state's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An expert on this topic accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “when companies begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That warning is now a reality. Recently, fossil fuel and mining firms have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to stop global warming. Firms have to date won $114bn through ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP