🔗 Share this article

What is your understand our system of government works? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Rise of Shadow Tribunals

Today, foreign corporations, and the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These sums are based not on tangible damages but funds the panel members decide the company might otherwise have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as firms observe each other, and hedge funds fund legal actions in exchange for a portion of the awards. The consequence? National sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the choices taken by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of extreme secrecy – into trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer ruled that proposals to open the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the Tories had granted. Currently, this legal outcome could be compromised by an foreign court accountable to exclusively the entities filing the suit.

During August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the United States was convened to hear it.

The company is suing the UK for the revenue it might have made if the mine had been allowed to proceed. We have little idea how much this sum represents. Who is representing it against the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him following the Russian aggression. He has started suing Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” A consultant on this matter accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That threat is now a reality. Recently, energy and resource corporations have filed a record number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to stop climate breakdown. Corporations have to date won vast sums through ISDS, of which energy giants have secured the majority. That represents the combined GDP