🔗 Share this article

Can you understand our political system operates? It could be similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Rise of Shadow Courts

Today, foreign corporations, or the billionaires that control them, can sue nation states for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, including businesses based in this country. The door is open solely for corporations registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums constitute not actual losses but funds the panel members conclude the company would perhaps have made. The state might be compelled to rescind the measure. It is discouraged from passing future laws in that area, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as companies learn from each other, and hedge funds bankroll lawsuits in return for a share of the settlements. The result? Sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings enacted by legislatures is that this provision has been written – without public consent, and often in a climate of profound opacity – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The justice ruled that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the previous administration had approved. Now, this success could be compromised by an offshore tribunal answering to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. We have no clear indication how much this might be. What legal team is representing it against the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it seems likely that he may employ the tribunal to contest the penalties the UK levied against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: half that state's yearly income. Part of the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

Misleading Claims and Escalating Costs

We were assured that such things wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” An adviser on this matter described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – official measures to stop environmental catastrophe. Firms have so far won $114bn through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP