🔗 Share this article

How do you perceive our political system operates? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Courts

Nowadays, international firms, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. Access is granted solely for businesses based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards constitute not tangible damages but compensation the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It is deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and hedge funds finance suits in return for a portion of the awards. The consequence? Sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the decisions taken by elected bodies is that this clause has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the High Court. The presiding officer determined that plans to open the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies filing the suit.

Last August, a firm whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has little idea how much this sum represents. Who is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company disputes it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, demanding $16bn: half that state's yearly budget. Part of the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that these events wouldn’t happen. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this matter described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. In the current period, energy and mining firms have filed a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP