🔗 Share this article

What is your reckon our political system works? Maybe similar to this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, international firms, along with the oligarchs that control them, can sue governments for the regulations they pass, at private courts composed of corporate lawyers. The cases are held behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even companies headquartered in this country. They are open only to businesses registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but money the tribunal officials decide the company would perhaps have made. The government may have to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds fund legal actions in exchange for a portion of the settlements. The result? Sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions taken by legislatures is that this clause has been incorporated – without democratic mandate, and often in a climate of profound opacity – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The new government subsequently revoked the licence the previous administration had issued. Currently, this legal outcome could be compromised by an foreign court reporting to no one but the companies petitioning it.

In August, a firm whose final controllers are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the US capital was convened to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have no clear indication how much this sum represents. Which individual is representing it against the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he’ll use the tribunal to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and there has not been a issue in the past.” An expert on this issue labelled activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That prediction is now a reality. This year, energy and mining firms have lodged a record number of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP