🔗 Share this article

How do you understand our political system operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. However, that’s how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

Today, foreign corporations, or the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these panels allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted solely for entities based overseas.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These sums are based not on actual losses but compensation the panel members decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be deterred from introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being initiated, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? Democratic sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings made by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice determined that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine could have no impact on national carbon targets. The new government later cancelled the licence the Tories had approved. Now, this success could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. We have little idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the high court supports it, then a overseas corporation disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it appears probable that he may employ the tribunal to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking a colossal sum: an amount representing half state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that such things could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this issue described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That threat is now a reality. Recently, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP