🔗 Share this article

What is your understand our system of government functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Emergence of Secret Courts

Today, overseas companies, along with the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at private courts made up of business advocates. The cases are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even enterprises based in this country. The door is open exclusively to corporations based overseas.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These sums constitute not actual losses but money the panel members conclude the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and private equity fund legal actions in exchange for a share of the settlements. The result? Sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings taken by elected bodies is that this clause has been inserted – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, activists won a great victory at the senior court. The judge determined that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The Labour government subsequently revoked the consent the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

Last August, a company whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Last week a tribunal in the United States was set up to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the tribunal to challenge the penalties the UK enacted against him after the Russian aggression. He has previously filed a claim against another European state with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that these events could not occur. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this issue described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations start to realise the influence they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. Recently, energy and mining firms have initiated a record number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – official measures to stop environmental catastrophe. Companies have to date won vast sums by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP