🔗 Share this article

What is your understand our system of government works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Legislation are enforced by the courts. That's it. However, that was how it used to work. Not anymore.

The Rise of Secret Courts

In the modern era, foreign corporations, or the billionaires behind them, can sue elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held in secret. Unlike our courts, these bodies provide no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of vast sums, potentially billions.

These awards represent not tangible damages but money the tribunal officials decide the company could potentially have made. The administration may have to drop the legislation. It will be deterred from passing future laws of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings made by elected bodies is that this stipulation has been written – without public consent, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge found that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government later cancelled the consent the Tories had granted. Now, this legal outcome could be compromised by an foreign court answering to exclusively the corporations filing the suit.

In August, a firm whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Who is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company disputes it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he may employ the arbitration process to challenge the penalties the UK enacted against him following the Russian aggression. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half nation's yearly income. Part of the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that these events wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were met with general mockery.

That threat has now materialised. Recently, oil and gas and extraction companies have lodged a historic level of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – official measures to halt environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP