🔗 Share this article

Can you perceive our democratic process operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that’s how it used to work. Those days are over.

The Advent of Offshore Tribunals

Nowadays, overseas companies, and the billionaires behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, including enterprises operating from this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

This compensation are based not on tangible damages but compensation the tribunal officials decide the company would perhaps have made. The state could be forced to abandon its policy. It becomes hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as companies learn from each other, and hedge funds finance suits in return for a portion of the awards. The outcome? National sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the rulings enacted by elected bodies is that this provision has been incorporated – without public consent, and often in a climate of profound opacity – within trade treaties.

A Real-World Case: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The new government then withdrew the permission the former government had issued. Today, this success could be compromised by an secret arbitration panel answering to only the companies filing the suit.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings challenging the UK government. The previous week a tribunal in the United States was set up to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Part of the legal team on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these events wouldn’t happen. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That threat has come to pass. In the current period, energy and extraction companies have lodged a unprecedented number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP