Can you understand our political system works? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.
The Rise of Secret Courts
Today, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. They are open solely for businesses operating from foreign soil.
Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.
These sums represent not tangible damages but money the tribunal officials decide the company might otherwise have made. The state might be compelled to abandon its policy. It will be deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.
A Process Spiralling Out of Control
Record numbers of legal actions are being brought, as firms observe each other, and hedge funds fund legal actions for a share of a share of the takings. The outcome? National sovereignty and popular rule are becoming too costly.
This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices made by parliaments is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.
A Concrete Case: The Cumbrian Coal Mine
Last year, activists achieved a major legal triumph at the High Court. The judge determined that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The new government subsequently revoked the permission the Tories had approved. Today, this success is under threat by an offshore tribunal answering to only the entities filing the suit.
During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Last week a tribunal in Washington DC was convened to hear it.
The claimant is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has little idea how much this might be. What legal team is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.
The Russian Challenge
Simultaneously that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK levied against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's yearly income. Among the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.
International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.
False Assurances and Escalating Threats
The public was told that these events could not occur. In 2014, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” An expert on this issue accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.
That prediction has now materialised. In the current period, energy and mining firms have filed a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP
