🔗 Share this article

What is your understand our system of government operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that was how it used to work. Those days are over.

The Emergence of Secret Tribunals

Today, international firms, or the oligarchs who own them, can sue nation states for the laws they pass, at private courts staffed by commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises operating from this country. The door is open exclusively to businesses registered abroad.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It will be discouraged from enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions made by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The Labour government subsequently revoked the consent the previous administration had granted. Today, this victory could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a firm whose beneficial owners are located in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot the MP. The government passes a law, the high court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case at present, but it seems likely that he will utilise the tribunal to contest the penalties the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against another European state with similar intent, seeking a colossal sum: an amount representing half state's yearly income. Included in the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Threats

We were assured that these events could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this issue described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has come to pass. In the current period, oil and gas and extraction companies have lodged a record number of suits against nations rich and poor, challenging – similar to the Whitehaven project – official measures to stop climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP