🔗 Share this article

Can you reckon our system of government works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. End of story. However, that was how it used to work. Not anymore.

The Emergence of Offshore Courts

In the modern era, international firms, and the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including companies headquartered in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it may order compensation of vast sums, running into billions.

This compensation constitute not tangible damages but money the tribunal officials decide the company might otherwise have made. The state may have to abandon its policy. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as firms take cues from each other, and hedge funds fund legal actions for a share of a cut of the awards. The outcome? Democratic sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the choices enacted by legislatures is that this clause has been inserted – absent public approval, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for 30 years, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Currently, this success faces being overturned by an foreign court answering to no one but the corporations bringing the case.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this might be. Which individual is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he’ll use the tribunal to fight the sanctions the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming sixteen billion dollars: an amount representing half nation's annual revenue. Part of the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these events were not possible. In 2014, a government leader, championing the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this topic described critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “once firms start to realise the influence bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has now materialised. Recently, energy and resource corporations have initiated a record number of cases against nations rich and poor, opposing – similar to the UK mine – state efforts to halt global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP