🔗 Share this article

How do you understand our democratic process works? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Nowadays, international firms, or the wealthy individuals who own them, are able to litigate against elected administrations for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are held in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted solely for corporations based overseas.

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 actual losses but funds the tribunal officials conclude the company would perhaps have made. The government may have to abandon its policy. It will be deterred from passing future laws along the same lines, worried about facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being brought, as corporations observe each other, and private equity fund legal actions in return for a cut of the awards. The result? Democratic sovereignty and popular rule are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer found that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government then withdrew the licence the previous administration had approved. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities bringing the case.

Last August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim challenging the UK government. Recently a tribunal in the US capital was set up to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it seems likely that he may employ the tribunal to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, demanding $16bn: half that nation's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these events were not possible. Previously, a senior politician, championing the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this topic described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a historic level of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP