🔗 Share this article

What is your understand our political system operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Courts

Nowadays, overseas companies, or the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals composed of commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including companies headquartered in this country. They are open only to entities registered abroad.

When a secret court finds that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards are based not on real financial harm but funds the tribunal officials determine the company might otherwise have made. The administration could be forced to rescind the measure. It is discouraged from passing future laws of a similar nature, worried about being sued.

A System Running Rampant

Unprecedented levels of cases are being filed, as corporations take cues from each other, and private equity fund legal actions for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices made by parliaments is that this stipulation has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government later cancelled the licence the former government had approved. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the entities filing the suit.

Last August, a firm whose ultimate owners are located in the tax haven initiated proceedings against the UK government. Last week a tribunal in the US capital was convened to hear it.

The company is suing the UK for the money it would have generated if the mine had received permission to commence operations. We have little idea how much this could amount to. Who is serving as its counsel in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK imposed on him after the Russian aggression. He has previously started suing another European state for this reason, demanding a colossal sum: an amount representing half government’s yearly budget. Part of the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that these events could not occur. Previously, a senior politician, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An adviser on this issue labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have filed a record number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Corporations have thus far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP