🔗 Share this article

What is your understand our democratic process works? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Emergence of Shadow Courts

Today, overseas companies, or the oligarchs behind them, can sue governments for the regulations they pass, at private courts composed of corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses based in this country. They are open exclusively to corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but money the arbitrators decide the company could potentially have made. The state could be forced to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as corporations observe each other, and investment funds bankroll lawsuits in return for a portion of the awards. The result? Democratic sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions made by elected bodies is that this provision has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – inside trade treaties.

A Concrete Case: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had granted. Today, this legal outcome could be compromised by an secret arbitration panel reporting to no one but the entities filing the suit.

Last August, a corporate entity whose ultimate owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this might be. Which individual is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot the MP. The government makes a decision, the domestic court upholds it, then a international entity disputes it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the court 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, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: half that government’s yearly income. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that these events could not occur. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “when companies grasp the influence they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. Recently, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to stop global warming. Companies have so far won vast sums through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP