🔗 Share this article

Can you reckon our political system functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it used to work. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the wealthy individuals behind them, have the power to sue governments for the laws they pass, at private courts staffed by business advocates. These proceedings are held in secret. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, including enterprises based in this country. They are open solely for entities registered abroad.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the arbitrators decide the company would perhaps have made. The state may have to abandon its policy. It is discouraged from introducing similar legislation in that area, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as companies observe each other, and hedge funds finance suits in exchange for a share of the takings. The consequence? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions enacted by legislatures is that this provision has been written – without public consent, and often in an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer determined that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government subsequently revoked the consent the former government had approved. Today, this success is under threat by an secret arbitration panel accountable to no one but the companies petitioning it.

In August, a company whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Recently a tribunal in the United States was convened to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The administration passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK enacted against him after the Russian aggression. He has already started suing Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half government’s yearly budget. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Risks

The public was told that such things were not possible. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An adviser on this topic described campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning has come to pass. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – government attempts to stop climate breakdown. Companies have so far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP