🔗 Share this article

How do you reckon our system of government functions? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Offshore Tribunals

Today, international firms, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at private courts composed of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals grant no right of appeal or legal review. The general public cannot take a case to them, just as our government, including companies based in this country. The door is open only to entities operating from foreign soil.

If a tribunal rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but compensation the arbitrators decide the company might otherwise have made. The state might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The consequence? Sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the choices taken by legislatures is that this clause has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – within trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, activists won a great victory at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had issued. Currently, this success faces being overturned by an offshore tribunal accountable to no one but the companies petitioning it.

Last August, a firm whose final controllers are located in the tax haven initiated proceedings against the UK government. Last week a tribunal in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Who is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The state passes a law, the high court upholds it, then a foreign company challenges it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case so far, but it appears probable that he will utilise the arbitration process to contest the penalties the UK enacted against him after the war in Ukraine. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: half that nation's yearly income. Included in the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that such things were not possible. Years ago, a government leader, championing the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning has now materialised. This year, oil and gas and mining firms have lodged a record number of cases against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Corporations have to date won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP