🔗 Share this article

Can you reckon our democratic process functions? Maybe something like this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Yet, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Tribunals

Nowadays, international firms, or the billionaires who own them, can sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to corporations registered abroad.

When a secret court finds that a government measure could harm the corporation’s projected profits, it can award compensation of vast sums, even billions.

These sums are based not on actual losses but money the panel members decide the company could potentially have made. The administration could be forced to rescind the measure. It will be hesitant to enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions taken by legislatures is that this stipulation has been written – without public consent, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The Labour government later cancelled the permission the Tories had issued. Currently, this legal outcome faces being overturned by an foreign court accountable to no one but the entities bringing the case.

During August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. Last week a dispute settlement body in the US capital was established to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. What legal team is serving as its counsel against the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK imposed on him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: half that nation's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that these events were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this matter labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “when companies start to realise the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were greeted by scepticism.

That warning has now materialised. Recently, oil and gas and extraction companies have filed a unprecedented number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP