🔗 Share this article

Can you understand our system of government operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Emergence of Secret Courts

Nowadays, foreign corporations, along with the billionaires who own them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but funds the arbitrators conclude the company could potentially have made. The state may have to abandon its policy. It is deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations learn from each other, and private equity fund legal actions in exchange for a share of the settlements. The result? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the senior court. The presiding officer found that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government later cancelled the permission the Tories had issued. Currently, this victory is under threat by an foreign court reporting to exclusively the entities petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Who is acting on its behalf against the state? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, demanding $16bn: half that government’s yearly budget. Among the legal team on his side? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as security for its financial support package arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that such things wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this matter accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies grasp the influence they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That warning has now materialised. In the current period, oil and gas and mining firms have lodged a record number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Firms have to date won $114bn by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP