🔗 Share this article

What is your reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Advent of Offshore Courts

Nowadays, overseas companies, along with the oligarchs behind them, have the power to sue nation states for the policies they pass, at private courts composed of commercial attorneys. These proceedings are held in secret. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators determine the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations learn from each other, and investment funds fund legal actions for a share of a cut of the settlements. The result? National sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions taken by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the high court. The justice determined that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government later cancelled the permission the former government had granted. Now, this legal outcome is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

Last August, a firm whose final controllers reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was set up to adjudicate on it.

This firm is suing the UK for the money it might have made if the mine had been allowed to commence operations. The public has little idea how much this could amount to. Who is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has previously started suing a small nation on these grounds, claiming sixteen billion dollars: half that nation's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that such things were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this topic accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction is now a reality. Recently, energy and resource corporations have filed a historic level of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to halt global warming. Corporations have so far won $114bn by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP