🔗 Share this article

What is your reckon our political system functions? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Rise of Shadow Courts

Nowadays, international firms, along with the oligarchs behind them, can sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. Access is granted only to corporations based overseas.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The state might be compelled to drop the legislation. It is deterred from passing future laws of a similar nature, for fear of facing litigation.

A System Running Rampant

Record numbers of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions in exchange for a share of the settlements. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the permission the Tories had approved. Today, this victory is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

During August, a firm whose final controllers are based in the tax haven initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf against the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, claiming $16bn: half that state's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these scenarios could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has not been a problem in the past.” An adviser on this topic labelled activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies grasp the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That threat is now a reality. Recently, energy and extraction companies have lodged a record number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to halt global warming. Companies have to date won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP