🔗 Share this article

What is your perceive our democratic process functions? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that’s how it once functioned. No longer.

The Emergence of Shadow Courts

Today, overseas companies, along with the oligarchs who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises based in this country. The door is open exclusively to entities based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums constitute not tangible damages but funds the panel members determine the company could potentially have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The consequence? Democratic sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions made by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of profound opacity – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the high court. The justice found that plans to open the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration later cancelled the consent the previous administration had granted. Currently, this success could be compromised by an foreign court answering to exclusively the entities filing the suit.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government passes a law, the domestic court supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case so far, but it seems likely that he may employ the tribunal to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has already started suing another European state for this reason, seeking a colossal sum: half that nation's yearly budget. Among the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that these events wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all these agreements, told us: “We’ve signed trade deal upon trade deal and there has not been a issue in the past.” A consultant on this issue described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies grasp the authority they now possess, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That warning has come to pass. Recently, fossil fuel and mining firms have lodged a record number of claims against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP