🔗 Share this article

How do you understand our system of government operates? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Rise of Offshore Tribunals

Today, overseas companies, and the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of business advocates. The cases take place in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but funds the panel members decide the company would perhaps have made. The administration might be compelled to rescind the measure. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The outcome? National sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices taken by parliaments is that this provision has been inserted – without democratic mandate, and frequently under conditions of profound opacity – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The justice ruled that plans to dig the first new deep coal mine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on national carbon targets. The new government then withdrew the licence the former government had granted. Currently, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have no clear indication how much this might be. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a international entity challenges it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he may employ the arbitration process to contest the penalties the UK levied against him following the Russian aggression. He has already filed a claim against Luxembourg on these grounds, seeking a colossal sum: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that such things wouldn’t happen. In 2014, a government leader, promoting the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms start to realise the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP