🔗 Share this article

How do you understand our democratic process functions? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Emergence of Offshore Tribunals

Today, overseas companies, and the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses based in this country. The door is open exclusively to entities operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation represent not actual losses but funds the arbitrators conclude the company could potentially have made. The government could be forced to abandon its policy. It will be discouraged from passing future laws in that area, worried about facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being initiated, as corporations learn from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The consequence? Sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the choices taken by elected bodies is that this clause has been written – without democratic mandate, and typically amid conditions of profound opacity – into trade treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, activists secured a significant win at the High Court. The judge found that plans to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the licence the former government had issued. Currently, this victory is under threat by an secret arbitration panel reporting to exclusively the corporations filing the suit.

In August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has little idea how much this might be. Who is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that such things wouldn’t happen. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies grasp the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with widespread derision.

That prediction has come to pass. Recently, energy and mining firms have lodged a record number of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP