🔗 Share this article

How do you perceive our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, or the billionaires who own them, can sue governments for the policies they pass, at private courts staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to corporations operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation represent not actual losses but compensation the arbitrators decide the company might otherwise have made. The government might be compelled to drop the legislation. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and hedge funds fund legal actions for a share of a cut of the settlements. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings taken by elected bodies is that this clause has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the high court. The presiding officer ruled that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations bringing the case.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in the United States was set up to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has little idea how much this sum represents. Which individual is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK levied against him following the Russian aggression. He has started suing another European state with similar intent, claiming a colossal sum: half that state's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Risks

The public was told that these scenarios were not possible. Years ago, a government leader, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An adviser on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Predictions that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have filed a historic level of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Firms have thus far won $114bn via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP