🔗 Share this article

How do you reckon our political system functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. However, that used to be how it used to work. Not anymore.

The Emergence of Secret Tribunals

In the modern era, foreign corporations, and the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. The general public are unable to file a case to them, nor can our government, including enterprises headquartered in this country. They are open solely for businesses registered abroad.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of vast sums, potentially billions.

This compensation are based not on real financial harm but funds the arbitrators decide the company might otherwise have made. The state may have to abandon its policy. It is discouraged from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as companies take cues from each other, and investment funds finance suits for a share of a portion of the awards. The result? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions made by parliaments is that this clause has been written – without public consent, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The justice ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the licence the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies filing the suit.

During August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the United States was set up to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. Who is serving as its counsel against the British government? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he’ll use the arbitration process to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has started suing another European state on these grounds, claiming a colossal sum: equivalent to half of state's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these events could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” An adviser on this issue accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations start to realise the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That threat has come to pass. This year, oil and gas and resource corporations have filed a historic level of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP