🔗 Share this article

Can you understand our political system functions? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Advent of Secret Tribunals

Today, overseas companies, and the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for entities registered abroad.

When a secret court finds that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These awards represent not actual losses but money the tribunal officials conclude the company could potentially have made. The state may have to drop the legislation. It is discouraged from introducing similar legislation along the same lines, worried about being sued.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as companies learn from each other, and hedge funds fund legal actions for a share of a cut of the takings. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the rulings taken by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the high court. The judge determined that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration later cancelled the licence the Tories had issued. Today, this victory is under threat by an secret arbitration panel answering to only the companies bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in the United States was set up to consider the case.

The company is suing the UK for the money it could have earned 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 challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was convened, 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 to date, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, seeking $16bn: half that nation's annual revenue. Included in the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these scenarios could not occur. Previously, a government leader, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An adviser on this matter accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the poorer states to the developed economies” were met with widespread derision.

That warning has come to pass. This year, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP