🔗 Share this article

What is your reckon our system of government functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Shadow Tribunals

Today, international firms, along with the oligarchs that control them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open exclusively to businesses operating from foreign soil.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but compensation the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being brought, as firms take cues from each other, and private equity fund legal actions in exchange for a cut of the awards. The consequence? National sovereignty and popular rule are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge found that proposals to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the licence the previous administration had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to exclusively the corporations bringing the case.

Last August, a firm whose final controllers are located in the tax haven lodged a claim against the UK government. Last week a tribunal in the US capital was convened to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to proceed. We have no clear indication how much this might be. What legal team is representing it challenging the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a foreign company challenges it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has already filed a claim against another European state with similar intent, demanding $16bn: half that government’s annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Risks

The public was told that these events could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to stop global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP