🔗 Share this article

Can you reckon our political system functions? Perhaps along the lines of this. We elect 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. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Courts

Today, foreign corporations, or the oligarchs who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are held in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to entities operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but funds the panel members decide the company could potentially have made. The state could be forced to drop the legislation. It becomes discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds finance suits in exchange for a cut of the awards. The result? Democratic sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The judge determined that schemes to dig the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government subsequently revoked the consent the Tories had approved. Today, this victory faces being overturned by an offshore tribunal answering to exclusively the corporations petitioning it.

During August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the United States was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. Who is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a foreign company disputes it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK enacted against him after the Russian aggression. He has already started suing another European state on these grounds, claiming a colossal sum: an amount representing half government’s annual revenue. Part of the legal team representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that such things wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this topic described campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations begin to understand the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has now materialised. Recently, energy and extraction companies have lodged a unprecedented number of cases against nations rich and poor, challenging – similar to the UK mine – state efforts to prevent global warming. Corporations have so far won vast sums through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP