🔗 Share this article

Can you understand our system of government functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Emergence of Secret Tribunals

Nowadays, overseas companies, and the oligarchs that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including companies based in this country. They are open exclusively to entities registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but money the tribunal officials conclude the company might otherwise have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the choices made by parliaments is that this provision has been incorporated – without public consent, and often in a climate of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the permission the previous administration had approved. Currently, this victory is under threat by an secret arbitration panel accountable to only the entities bringing the case.

In August, a company whose final controllers reside in the tax haven initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was established to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that state's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these events were not possible. Years ago, a senior politician, championing the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies grasp the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with general mockery.

That warning is now a reality. In the current period, fossil fuel and extraction companies have lodged a record number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP