🔗 Share this article

What is your understand our political system functions? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Rise of Secret Tribunals

Today, overseas companies, or the billionaires that control them, can sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases take place away from public scrutiny. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. Access is granted solely for entities operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These sums are based not on tangible damages but compensation the panel members conclude the company would perhaps have made. The state could be forced to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as firms learn from each other, and investment funds finance suits in return for a share of the settlements. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions enacted by legislatures is that this provision has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The UK Coal Mine

A year ago, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the permission the former government had approved. Today, this legal outcome is under threat by an foreign court reporting to only the corporations filing the suit.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has no clear indication how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this topic labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Predictions 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 dismissed with scepticism.

That threat has now materialised. In the current period, energy and mining firms have initiated a historic level of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP