🔗 Share this article

What is your understand our democratic process works? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, overseas companies, and the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for businesses registered abroad.

When a secret court finds that a government measure may compromise the corporation’s anticipated profits, it may order damages of vast sums, even billions.

This compensation constitute not tangible damages but money the panel members determine the company would perhaps have made. The government could be forced to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, for fear of being sued.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists won a great victory at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government then withdrew the consent the Tories had granted. Currently, this legal outcome faces being overturned by an offshore tribunal answering to no one but the companies filing the suit.

Last August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the money it might have made if the mine had received permission to commence operations. Citizens have little idea how much this might be. What legal team is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The government makes a decision, the high court validates it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: an amount representing half government’s yearly budget. Among the counsel representing him there? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this topic described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “when companies grasp the influence they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That prediction is now a reality. This year, oil and gas and resource corporations have lodged a record number of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP