🔗 Share this article

Can you reckon our political system operates? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Rise of Secret Tribunals

In the modern era, foreign corporations, and the billionaires behind them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums represent not real financial harm but funds the panel members conclude the company would perhaps have made. The government may have to drop the legislation. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Running Rampant

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds finance suits in exchange for a share of the takings. The outcome? National sovereignty and democratic governance are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the choices taken by elected bodies is that this provision has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – into international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that plans to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have zero effect on climate commitments. The Labour government then withdrew the permission the former government had approved. Currently, this success faces being overturned by an foreign court answering to exclusively the companies filing the suit.

During August, a company whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration makes a decision, the high court validates it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it appears probable that he may employ the tribunal to fight the penalties the UK enacted against him after the war in Ukraine. He has already filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that such things could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” An expert on this topic accused campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That warning is now a reality. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to stop global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP