🔗 Share this article

How do you perceive our system of government works? Maybe similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Emergence of Secret Tribunals

In the modern era, foreign corporations, and the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including companies headquartered in this country. Access is granted solely for entities operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These sums constitute not actual losses but funds the tribunal officials decide the company would perhaps have made. The state could be forced to abandon its policy. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations observe each other, and hedge funds finance suits for a share of a portion of the takings. The result? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices enacted by legislatures is that this stipulation has been incorporated – without public consent, and often in a climate of profound opacity – into trade treaties.

A Concrete Example: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The judge ruled that plans to dig the first new deep coal mine in the UK for three decades, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had issued. Currently, this legal outcome is under threat by an secret arbitration panel answering to no one but the entities filing the suit.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was established to hear it.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: an amount representing half nation's yearly budget. Among the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

We were assured that such things were not possible. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has now materialised. This year, oil and gas and resource corporations have initiated a record number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP