🔗 Share this article

How do you understand our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Rise of Secret Courts

Today, foreign corporations, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted only to businesses registered abroad.

When a secret court rules that a government measure could harm the corporation’s expected profits, it may order damages of vast sums, running into billions.

This compensation represent not actual losses but funds the tribunal officials decide the company might otherwise have made. The state could be forced to abandon its policy. It is deterred from enacting future policies along the same lines, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by parliaments is that this provision has been written – absent public approval, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The new government later cancelled the consent the Tories had approved. Today, this victory is under threat by an foreign court accountable to exclusively the companies bringing the case.

During August, a company whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. Which individual is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he will utilise the arbitration process to contest the penalties the UK imposed on him after the war in Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: an amount representing half nation's yearly income. Part of the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Threats

Politicians promised that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “when companies grasp the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction is now a reality. Recently, fossil fuel and extraction companies have lodged a historic level of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP