🔗 Share this article

How do you perceive our political system operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that’s how it used to work. No longer.

The Rise of Secret Courts

In the modern era, international firms, or the oligarchs that control them, can sue governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, including enterprises based in this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s projected profits, it can award compensation of hundreds of millions, running into billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company could potentially have made. The administration may have to rescind the measure. It is hesitant to enacting future policies along the same lines, for fear of being sued.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as corporations observe each other, and investment funds bankroll lawsuits for a share of 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 explanation it can supersede a country's own laws and the decisions made by parliaments is that this provision has been written – without democratic mandate, and typically amid conditions of extreme secrecy – within trade treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer found that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government then withdrew the consent the Tories had issued. Today, this victory could be compromised by an offshore tribunal answering to no one but the entities bringing the case.

During August, a firm whose final controllers are located in the tax haven initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is suing the UK for the profits it might have made if the mine had been permitted to proceed. The public has no clear indication how much this might be. Which individual is representing it against the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity contests it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case so far, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, seeking $16bn: an amount representing half nation's yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen state funds as guarantee 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 trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that such things were not possible. Years ago, a former prime minister, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “once firms grasp the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That prediction has come to pass. This year, oil and gas and mining firms have lodged a unprecedented number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to stop climate breakdown. Companies have thus far won vast sums via ISDS, of which energy giants have obtained $84bn. That represents the combined GDP