🔗 Share this article

How do you perceive our political system functions? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Rise of Secret Courts

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises based in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel determines that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but money the tribunal officials decide the company would perhaps have made. The government may have to drop the legislation. It is deterred from enacting future policies in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as companies take cues from each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices enacted by parliaments is that this provision has been written – without democratic mandate, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, activists won a great victory at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The Labour government later cancelled the permission the former government had granted. Today, this victory is under threat by an foreign court reporting to only the entities petitioning it.

During August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the United States was established to hear it.

The company is suing the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is representing it challenging the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has filed a claim against a small nation for this reason, demanding $16bn: equivalent to half of government’s yearly budget. Included in the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that these scenarios could not occur. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this topic accused activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Warnings that “as corporations grasp the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. In the current period, energy and resource corporations have lodged a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP