🔗 Share this article

Can you understand our system of government works? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Today, international firms, and the oligarchs that control them, are able to litigate against governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. The door is open exclusively to corporations registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being brought, as companies observe each other, and hedge funds finance suits in return for a cut of the settlements. The consequence? Democratic sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices taken by parliaments is that this stipulation has been incorporated – without public consent, and frequently under conditions of total confidentiality – into trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration subsequently revoked the licence the Tories had issued. Now, this victory could be compromised by an foreign court reporting to only the corporations bringing the case.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. The public has no clear indication how much this could amount to. Who is representing it challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The government enacts a policy, the high court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him after the Russian aggression. He has initiated proceedings against a small nation with similar intent, demanding $16bn: half that state's yearly income. Included in the counsel on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Risks

Politicians promised that these events could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this matter described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the influence they now possess, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That prediction has now materialised. Recently, fossil fuel and mining firms have filed a historic level of suits against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to prevent global warming. Corporations have so far won vast sums through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP