🔗 Share this article

What is your understand our political system operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

In the modern era, foreign corporations, along with the oligarchs who own them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. The cases take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies based in this country. They are open only to businesses based overseas.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These awards are based not on actual losses but money the tribunal officials conclude the company might otherwise have made. The government could be forced to drop the legislation. It will be discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the takings. The result? National sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices made by elected bodies is that this clause has been incorporated – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Concrete Instance: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer found that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The new government later cancelled the permission the Tories had granted. Now, this victory is under threat by an foreign court answering to no one but the companies petitioning it.

During August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the United States was convened to hear it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. What legal team is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the high court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he may employ the tribunal to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has already started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these events were not possible. Years ago, a senior politician, promoting 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 adviser on this matter labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That warning is now a reality. Recently, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP