🔗 Share this article

What is your understand our system of government functions? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Advent of Shadow Tribunals

Today, foreign corporations, along with the billionaires that control them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even companies operating from this country. They are open only to entities operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not actual losses but money the panel members conclude the company could potentially have made. The state could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as firms observe each other, and investment funds finance suits in exchange for a portion of the takings. The result? Democratic sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices made by parliaments is that this provision has been written – without democratic mandate, and frequently under conditions of profound opacity – inside international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, activists secured a significant win at the High Court. The presiding officer found that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the permission the Tories had issued. Currently, this success could be compromised by an secret arbitration panel answering to no one but the entities filing the suit.

During August, a company whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was established to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. The public has little idea how much this sum represents. Who is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: half that state's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that such things wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That warning has now materialised. This year, oil and gas and mining firms have initiated a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to halt global warming. Corporations have to date won vast sums by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP