🔗 Share this article

Can you perceive our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. End of story. However, that’s how it used to work. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, along with the oligarchs that control them, can sue nation states for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses based in this country. They are open only to businesses operating from foreign soil.

If a tribunal finds that a legislative action could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions, even billions.

These sums are based not on tangible damages but funds the panel members conclude the company could potentially have made. The government could be forced to abandon its policy. It is discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and private equity fund legal actions in exchange for a share of the awards. The outcome? Sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the choices taken by legislatures is that this provision has been inserted – without public consent, and typically amid a climate of extreme secrecy – within trade treaties.

A Specific Case: The UK Coal Mine

Last year, activists won a great victory at the high court. The judge determined that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on national carbon targets. The new government later cancelled the permission the former government had granted. Today, this legal outcome could be compromised by an offshore tribunal accountable to no one but the companies filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have little idea how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The government makes a decision, the domestic court supports it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it appears probable that he may employ the tribunal to contest the penalties the UK enacted against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding a colossal sum: half that state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this issue accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. In the current period, energy and extraction companies have lodged a record number of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP