🔗 Share this article

What is your reckon our political system operates? Maybe something like this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Rise of Offshore Tribunals

Today, overseas companies, along with the oligarchs behind them, are able to litigate against nation states for the policies they pass, at private courts made up of business advocates. The cases are held behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted only to entities operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it may order compensation of vast sums, running into billions.

These sums represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The government may have to rescind the measure. It is discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being initiated, as firms observe each other, and hedge funds finance suits in return for a share of the settlements. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Specific Example: The UK Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that plans to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal answering to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was established to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no idea how much this might be. What legal team is representing it against the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to fight the penalties the UK levied against him after the invasion of Ukraine. He has already filed a claim against another European state on these grounds, seeking $16bn: equivalent to half of government’s annual revenue. Among the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that such things were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, stated: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has come to pass. Recently, energy and resource corporations have filed a historic level of cases against nations both wealthy and developing, opposing – similar to the UK mine – government attempts to halt global warming. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP