🔗 Share this article

How do you perceive our political system works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Today, international firms, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open only to entities based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it may order compensation of vast sums, potentially billions.

This compensation represent not tangible damages but money the panel members determine the company could potentially have made. The state may have to rescind the measure. It will be deterred from passing future laws of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Record numbers of disputes are being filed, as companies learn from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The result? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The justice determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had granted. Currently, this legal outcome is under threat by an foreign court reporting to only the companies bringing the case.

Last August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is representing it in opposition to the state? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity disputes it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against a small nation on these grounds, demanding a colossal sum: an amount representing half nation's yearly budget. Included in the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies start to realise the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That warning has come to pass. Recently, oil and gas and resource corporations have initiated a record number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP