🔗 Share this article

Can you perceive our democratic process functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Rise of Secret Tribunals

Today, international firms, and the billionaires behind them, can sue governments for the laws they pass, at private courts made up of business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. The general public cannot take a case to them, just as our government, including businesses operating from this country. They are open solely for corporations based overseas.

When a secret court rules that a law or policy might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These sums are based not on real financial harm but funds the tribunal officials decide the company would perhaps have made. The state might be compelled to drop the legislation. It will be discouraged from passing future laws of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as firms observe each other, and private equity fund legal actions in return for a cut of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The judge ruled that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the Tories had issued. Currently, this success could be compromised by an foreign court accountable to only the entities filing the suit.

Last August, a company whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in the US capital was convened to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. Who is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it appears probable that he may employ the arbitration process to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has filed a claim against another European state for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Part of the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that such things were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An expert on this matter accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “when companies grasp the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning has now materialised. This year, oil and gas and resource corporations have initiated a historic level of suits against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have so far won vast sums via ISDS, of which oil majors have secured the majority. That equates to the combined GDP