🔗 Share this article

How do you reckon our democratic process functions? It could be along the lines of this. We elect MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is maintained by the courts. End of story. However, that was how it used to work. Those days are over.

The Rise of Shadow Courts

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These awards constitute not actual losses but funds the panel members determine the company could potentially have made. The administration may have to drop the legislation. It becomes hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under conditions of total confidentiality – inside trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government then withdrew the licence the previous administration had granted. Currently, this victory faces being overturned by an secret arbitration panel reporting to only the entities petitioning it.

Last August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was established to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration passes a law, the domestic court supports it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the tribunal to fight the penalties the UK enacted against him following the war in Ukraine. He has already filed a claim against another European state for this reason, demanding $16bn: an amount representing half government’s yearly income. Among the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these events could not occur. Years ago, a government leader, championing the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies begin to understand the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has now materialised. In the current period, energy and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to halt global warming. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP