🔗 Share this article

What is your perceive our political system works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Emergence of Secret Tribunals

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts made up of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, including enterprises headquartered in this country. They are open solely for corporations registered abroad.

When a secret court determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but money the tribunal officials determine the company could potentially have made. The state may have to abandon its policy. It will be hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations learn from each other, and private equity fund legal actions in exchange for a share of the takings. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings enacted by elected bodies is that this provision has been written – without public consent, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that proposals to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the licence the previous administration had granted. Now, this success is under threat by an secret arbitration panel answering to exclusively the companies bringing the case.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Which individual is representing it against the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it appears probable that he’ll use the arbitration process to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously started suing a small nation for this reason, claiming $16bn: half that state's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

Politicians promised that these events wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to halt climate breakdown. Firms have to date won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP