🔗 Share this article

Can you understand our system of government operates? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Advent of Shadow Courts

In the modern era, overseas companies, and the billionaires that control them, can sue governments for the policies they pass, at offshore tribunals made up of business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including enterprises based in this country. Access is granted solely for corporations based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it can award damages of vast sums, running into billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company might otherwise have made. The administration could be forced to abandon its policy. It is hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the awards. The consequence? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the choices taken by legislatures is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Specific Example: The UK Coalmine

Last year, environmental campaigners won a great victory at the senior court. The judge found that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The new government subsequently revoked the permission the former government had issued. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

During August, a company whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Last week a dispute settlement body in the United States was convened to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Which individual is acting on its behalf against the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK levied against him following the Russian aggression. He has started suing Luxembourg for this reason, demanding sixteen billion dollars: half that government’s yearly budget. Part of the legal team on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over elected governments could be blocking the funds Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these events were not possible. In 2014, a government leader, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this topic labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “once firms grasp the power they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – as in the case of the UK mine – government attempts to halt environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP