🔗 Share this article

How do you perceive our political system functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. End of story. Well, that used to be how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, along with the billionaires who own them, are able to litigate against nation states for the policies they pass, at private courts staffed by corporate lawyers. Such disputes take place in secret. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted only to businesses based overseas.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These awards constitute not tangible damages but money the arbitrators determine the company would perhaps have made. The state might be compelled to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The consequence? National sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the choices enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the permission the previous administration had granted. Now, this victory is under threat by an foreign court reporting to no one but the corporations petitioning it.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim against the UK government. Last week a tribunal in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. We have no idea how much this might be. What legal team is serving as its counsel challenging the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The government makes a decision, the national judiciary upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against another European state on these grounds, claiming $16bn: equivalent to half of government’s yearly income. Part of the legal team on his side? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that these events could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this issue labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations begin to understand the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That prediction is now a reality. This year, fossil fuel and resource corporations have filed a record number of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – state efforts to halt global warming. Companies have to date won $114bn through ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP