🔗 Share this article

Can you perceive our political system functions? Perhaps something like this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

Nowadays, foreign corporations, and the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even businesses based in this country. They are open exclusively to entities based overseas.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it can award damages of vast sums, running into billions.

These awards represent not tangible damages but funds the tribunal officials conclude the company would perhaps have made. The government could be forced to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as firms take cues from each other, and hedge funds fund legal actions in return for a share of the settlements. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – into trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge found that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government later cancelled the licence the former government had granted. Today, this legal outcome could be compromised by an foreign court accountable to only the entities filing the suit.

During August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in Washington DC was set up to hear it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. We have little idea how much this sum represents. Who is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the restrictions the UK levied against him following the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, seeking a colossal sum: equivalent to half of government’s yearly income. Included in the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that these events could not occur. In 2014, a former prime minister, championing the most significant and hazardous of all these agreements, told us: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this topic accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat has now materialised. This year, fossil fuel and extraction companies have initiated a record number of suits against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to prevent global warming. Companies have to date won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP