🔗 Share this article

How do you perceive our system of government works? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Yet, that used to be how it once functioned. Not anymore.

The Advent of Secret Courts

In the modern era, foreign corporations, and the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at private courts made up of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators determine the company could potentially have made. The administration might be compelled to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The consequence? National sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings made by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – inside trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the consent the former government had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to only the companies petitioning it.

In August, a company whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this might be. What legal team is representing it challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case so far, but it seems likely that he may employ the arbitration process to contest the sanctions the UK enacted against him after the Russian aggression. He has started suing Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s delay in using frozen Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that such things were not possible. In 2014, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with widespread derision.

That threat has now materialised. This year, energy and extraction companies have initiated a record number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to stop global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP