🔗 Share this article

How do you perceive our political system operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, international firms, or the oligarchs that control them, have the power to sue nation states for the policies they pass, at private courts made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for entities based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums represent not tangible damages but money the tribunal officials conclude the company would perhaps have made. The state may have to rescind the measure. It is deterred from enacting future policies of a similar nature, worried about being sued.

A Process Running Rampant

Historically high figures of legal actions are being filed, as corporations take cues from each other, and hedge funds finance suits in exchange for a share of the awards. The outcome? Sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the choices taken by parliaments is that this provision has been incorporated – absent public approval, and often in conditions of profound opacity – into trade treaties.

A Specific Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had issued. Now, this success is under threat by an offshore tribunal reporting to exclusively the entities petitioning it.

During August, a company whose final controllers reside in the tax haven initiated proceedings versus the UK government. The previous week a tribunal in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Included in the counsel on his side? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Risks

The public was told that these events were not possible. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP