🔗 Share this article

How do you perceive our political system functions? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. The law are enforced by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Today, international firms, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at private courts made up of corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, including businesses based in this country. They are open solely for entities based overseas.

If a tribunal determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums are based not on real financial harm but funds the panel members conclude the company could potentially have made. The government could be forced to abandon its policy. It is hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being filed, as firms take cues from each other, and private equity fund legal actions in return for a portion of the awards. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings taken by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice determined that proposals to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government later cancelled the licence the former government had granted. Now, this success faces being overturned by an secret arbitration panel answering to exclusively the companies petitioning it.

During August, a company whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. Citizens have little idea how much this might be. Who is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already started suing another European state on these grounds, demanding a colossal sum: half that nation's yearly income. Included in the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. In the current period, fossil fuel and extraction companies have lodged a record number of suits against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP