🔗 Share this article

Can you perceive our political system works? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Secret Courts

Nowadays, foreign corporations, or the billionaires behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these bodies allow no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. Access is granted exclusively to businesses based overseas.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These sums are based not on real financial harm but funds the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The outcome? Sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been written – without public consent, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists secured a significant win at the senior court. The presiding officer determined that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the permission the previous administration had granted. Today, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the entities filing the suit.

During August, a firm whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this could amount to. Who is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it seems likely that he may employ the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming $16bn: equivalent to half of nation's yearly income. Among the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the strong ones” were dismissed with general mockery.

That warning has come to pass. In the current period, fossil fuel and extraction companies have initiated a historic level of suits against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to stop climate breakdown. Corporations have so far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP