🔗 Share this article

How do you perceive our democratic process operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of business advocates. The cases take place away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for corporations registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from enacting future policies along the same lines, worried about being sued.

A System Growing Exponentially

Unprecedented levels of cases are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a share of the settlements. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by legislatures is that this provision has been written – without democratic mandate, and often in conditions of total confidentiality – inside international trade agreements.

A Specific Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the senior court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government then withdrew the permission the former government had issued. Now, this legal outcome could be compromised by an foreign court reporting to only the corporations petitioning it.

In August, a firm whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to go ahead. We have no idea how much this could amount to. Who is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: half that state's yearly income. Part of the lawyers representing him there? Cherie Blair, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that these scenarios were not possible. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and resource corporations have initiated a record number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Firms have so far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP