🔗 Share this article

What is your reckon our political system operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, and the oligarchs who own them, are able to litigate against nation states for the policies they pass, at private courts staffed by commercial attorneys. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

This compensation represent not real financial harm but money the tribunal officials determine the company might otherwise have made. The administration might be compelled to abandon its policy. It is hesitant to enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as firms take cues from each other, and private equity finance suits in exchange for a cut of the settlements. The result? National sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions made by parliaments is that this provision has been written – without democratic mandate, and often in a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the consent the Tories had approved. Currently, this success is under threat by an offshore tribunal accountable to only the entities filing the suit.

During August, a firm whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was convened to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. Which individual is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against another European state for this reason, seeking a colossal sum: half that nation's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that these scenarios could not occur. In 2014, a government leader, championing the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this matter accused campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies grasp the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to halt environmental catastrophe. Firms have thus far won $114bn through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP