🔗 Share this article

What is your perceive our political system works? Perhaps similar to this. We elect MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Rise of Secret Courts

In the modern era, foreign corporations, along with the wealthy individuals who own them, have the power to sue governments for the regulations they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, running into billions.

This compensation represent not actual losses but funds the panel members conclude the company would perhaps have made. The state may have to drop the legislation. It is discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as corporations observe each other, and private equity fund legal actions for a share of a cut of the settlements. The outcome? Sovereignty and democracy are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions made by legislatures is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The new government then withdrew the licence the former government had approved. Today, this victory is under threat by an secret arbitration panel answering to no one but the entities petitioning it.

Last August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. The public has little idea how much this could amount to. What legal team is representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The state enacts a policy, the high court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it appears probable that he’ll use the arbitration process to fight the penalties the UK imposed on him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding a colossal sum: an amount representing half government’s annual revenue. Part of the lawyers on his side? Cherie Blair, married to the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these scenarios were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat has now materialised. This year, fossil fuel and resource corporations have filed a record number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – government attempts to stop global warming. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP