🔗 Share this article

Can you perceive our political system functions? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that was how it used to work. Not anymore.

The Advent of Secret Courts

Nowadays, overseas companies, along with the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions, potentially billions.

These awards represent not actual losses but money the arbitrators conclude the company might otherwise have made. The government might be compelled to abandon its policy. It will be hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the settlements. The consequence? National sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices taken by legislatures is that this provision has been written – without public consent, and typically amid an atmosphere of profound opacity – inside international trade agreements.

A Specific Example: The UK Coal Mine

A year ago, activists won a great victory at the senior court. The justice determined that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the consent the former government had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to only the corporations bringing the case.

Last August, a company whose ultimate owners reside in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this could amount to. Who is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him after the war in Ukraine. He has previously filed a claim against another European state with similar intent, seeking a colossal sum: half that government’s annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Threats

Politicians promised that these events were not possible. In 2014, a former prime minister, championing the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and mining firms have filed a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to prevent global warming. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP