🔗 Share this article

How do you perceive our political system functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Rise of Secret Tribunals

Today, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are held in secret. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation represent not tangible damages but funds the panel members determine the company might otherwise have made. The administration may have to drop the legislation. It is hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of legal actions are being filed, as companies take cues from each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The consequence? National sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions taken by legislatures is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Concrete Case: The Whitehaven Coal Mine

A year ago, activists won a great victory at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government later cancelled the permission the former government had approved. Currently, this legal outcome faces being overturned by an offshore tribunal answering to exclusively the corporations petitioning it.

Last August, a company whose final controllers are located in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The state makes a decision, the domestic court supports it, then a overseas corporation contests it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking $16bn: half that state's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that these events could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this topic accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That prediction is now a reality. Recently, fossil fuel and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Corporations have to date won vast sums via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP