🔗 Share this article

Can you perceive our system of government functions? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Secret Tribunals

In the modern era, international firms, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at private courts composed of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. They are open exclusively to businesses registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it can award compensation of vast sums, even billions.

These sums are based not on real financial harm but compensation the arbitrators determine the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and frequently under conditions of profound opacity – within trade treaties.

A Specific Case: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The presiding officer determined that schemes to dig the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The Labour government later cancelled the permission the former government had issued. Currently, this legal outcome faces being overturned by an foreign court reporting to exclusively the corporations filing the suit.

Last August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the United States was set up to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. Citizens have little idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has previously started suing Luxembourg with similar intent, demanding sixteen billion dollars: half that nation's yearly income. Part of the counsel on his side? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that these events could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has never been a problem in the past.” A consultant on this issue labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms start to realise the influence bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That prediction is now a reality. This year, oil and gas and resource corporations have initiated a record number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop climate breakdown. Firms have thus far won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP