🔗 Share this article

What is your understand our system of government works? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

In the modern era, international firms, or the oligarchs that control them, can sue nation states for the laws they pass, at private courts composed of business advocates. The cases take place behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses based in this country. Access is granted exclusively to businesses registered abroad.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not real financial harm but compensation the arbitrators decide the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from passing future laws in that area, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds fund legal actions for a share of a cut of the settlements. The outcome? National sovereignty and democratic governance are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by legislatures is that this provision has been written – without democratic mandate, and often in conditions of profound opacity – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had issued. Now, this success is under threat by an foreign court answering to only the companies petitioning it.

During August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. We have no idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a international entity challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he will utilise the arbitration process to fight the penalties the UK levied against him subsequent to the Russian aggression. He has previously started suing a small nation on these grounds, demanding a colossal sum: equivalent to half of state's yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that such things could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic labelled activists of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with general mockery.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP