🔗 Share this article

How do you reckon our democratic process functions? It could be something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, and the billionaires who own them, can sue governments for the policies they pass, at private courts made up of commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These sums are based not on tangible damages but compensation the tribunal officials decide the company might otherwise have made. The state might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being brought, as firms learn from each other, and investment funds fund legal actions in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice determined that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the permission the former government had approved. Now, this victory is under threat by an foreign court reporting to no one but the entities filing the suit.

Last August, a company whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in the United States was established to adjudicate on it.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no idea how much this might be. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it appears probable that he’ll use the arbitration process to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: half that state's yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its financial support package is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

Politicians promised that such things could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by scepticism.

That prediction has now materialised. Recently, fossil fuel and mining firms have lodged a record number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP