🔗 Share this article

How do you perceive our political system functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that was how it used to work. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, or the oligarchs behind them, can sue governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these panels provide no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises operating from this country. Access is granted exclusively to corporations registered abroad.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but compensation the arbitrators decide the company could potentially have made. The administration may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations observe each other, and hedge funds finance suits in return for a portion of the takings. The result? Sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the choices enacted by legislatures is that this stipulation has been written – without democratic mandate, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The justice determined that proposals to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the consent the former government had approved. Now, this legal outcome faces being overturned by an foreign court accountable to exclusively the corporations bringing the case.

During August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. Which individual is representing it in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half state's annual revenue. Part of the legal team on his side? a prominent lawyer, spouse of the previous PM.

International law scholars argue that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this topic labelled campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That warning has now materialised. In the current period, energy and mining firms have lodged a record number of cases against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP