🔗 Share this article

How do you reckon our system of government operates? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that’s how it used to work. No longer.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, and the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases take place away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, including companies based in this country. Access is granted solely for entities operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards represent not tangible damages but money the tribunal officials conclude the company could potentially have made. The administration might be compelled to rescind the measure. It will be hesitant to passing future laws along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being brought, as corporations observe each other, and investment funds fund legal actions for a share of a cut of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings made by elected bodies is that this clause has been written – absent public approval, and typically amid conditions of profound opacity – within international trade agreements.

A Real-World Example: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Now, this legal outcome is under threat by an offshore tribunal reporting to only the corporations bringing the case.

Last August, a corporate entity whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the arbitration process to contest the sanctions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, demanding $16bn: equivalent to half of nation's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

We were assured that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and mining firms have initiated a historic level of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP