🔗 Share this article

What is your perceive our system of government operates? It could be something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Today, overseas companies, or the billionaires who own them, have the power to sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels grant no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. They are open only to entities registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These sums constitute not real financial harm but funds the arbitrators determine the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The consequence? Sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings enacted by elected bodies is that this clause has been written – without democratic mandate, and often in a climate of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge found that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The new government later cancelled the licence the former government had issued. Currently, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the entities petitioning it.

During August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this might be. Which individual is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he may employ the tribunal to challenge the sanctions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, claiming a colossal sum: half that state's yearly budget. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that these scenarios were not possible. In 2014, a government leader, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue labelled campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP