🔗 Share this article

What is your perceive our system of government operates? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Courts

In the modern era, overseas companies, or the oligarchs who own them, are able to litigate against governments for the policies they pass, at private courts composed of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted exclusively to businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company would perhaps have made. The state may have to abandon its policy. It will be deterred from enacting future policies along the same lines, worried about being sued.

A Process Growing Exponentially

Record numbers of disputes are being brought, as companies take cues from each other, and hedge funds fund legal actions in return for a cut of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the decisions enacted by elected bodies is that this clause has been written – without public consent, and often in conditions of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the high court. The judge ruled that proposals to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Today, this success could be compromised by an foreign court answering to only the entities bringing the case.

Last August, a firm whose final controllers are located in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. The public has no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The state passes a law, the high court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it seems likely that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against another European state for this reason, demanding a colossal sum: half that nation's annual revenue. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios were not possible. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, told us: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An expert on this topic accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. This year, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to stop climate breakdown. Companies have to date won vast sums through ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP