🔗 Share this article

Can you perceive our democratic process functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Offshore Courts

In the modern era, overseas companies, along with the billionaires who own them, can sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. They are open only to entities registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but money the panel members conclude the company would perhaps have made. The administration may have to drop the legislation. It will be deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as firms observe each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The consequence? Sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions made by parliaments is that this provision has been incorporated – absent public approval, and frequently under conditions of total confidentiality – into international trade agreements.

A Concrete Instance: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had approved. Currently, this victory is under threat by an secret arbitration panel answering to only the entities filing the suit.

Last August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

This firm is suing the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company disputes it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the tribunal to challenge the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state for this reason, seeking $16bn: half that nation's yearly income. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen Russian assets as security for its financial support package is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An expert on this topic described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “as corporations start to realise the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations rich and poor, opposing – like the example of the UK mine – government attempts to prevent climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP