🔗 Share this article

Can you perceive our democratic process functions? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. End of story. Well, that was how it used to work. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, and the billionaires who own them, have the power to sue governments for the laws they pass, at private courts made up of business advocates. The cases take place away from public scrutiny. Unlike our courts, these panels provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted only to corporations operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

This compensation are based not on real financial harm but funds the arbitrators conclude the company could potentially have made. The administration may have to drop the legislation. It is hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as firms learn from each other, and investment funds finance suits in return for a cut of the takings. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings taken by parliaments is that this provision has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – inside trade treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that plans to dig the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the permission the previous administration had issued. Now, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the entities bringing the case.

Last August, a firm whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this sum represents. Who is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a foreign company contests it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the penalties the UK levied against him after the Russian aggression. He has previously started suing Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized Russian assets as security for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that such things could not occur. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this matter described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations begin to understand the influence bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has now materialised. Recently, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP