🔗 Share this article

Can you perceive our political system operates? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, overseas companies, and the oligarchs who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for entities based overseas.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but money the arbitrators determine the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as companies take cues from each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been written – without democratic mandate, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the High Court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The new government later cancelled the licence the previous administration had granted. Currently, this success is under threat by an secret arbitration panel reporting to exclusively the corporations petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have little idea how much this could amount to. Which individual is representing it in opposition to the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK enacted against him after the war in Ukraine. He has started suing Luxembourg with similar intent, demanding a colossal sum: equivalent to half of nation's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s hesitation in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” An expert on this topic accused critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “as corporations grasp the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by general mockery.

That prediction has now materialised. Recently, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have to date won $114bn via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP