🔗 Share this article

Can you understand our political system functions? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. However, that used to be how it once functioned. Those days are over.

The Advent of Offshore Courts

Nowadays, overseas companies, and the oligarchs who own them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, including enterprises operating from this country. Access is granted solely for corporations based overseas.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These awards represent not actual losses but compensation the arbitrators decide the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes deterred from passing future laws of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and investment funds fund legal actions in exchange for a share of the settlements. The outcome? Sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings made by elected bodies is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the high court. The judge found that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The new government then withdrew the permission the former government had issued. Today, this success could be compromised by an secret arbitration panel answering to no one but the entities bringing the case.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. Which individual is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration passes a law, the national judiciary upholds it, then a international entity challenges it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Case

On the same day that the court on the coalmine case was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK imposed on him after the Russian aggression. He has already started suing Luxembourg for this reason, demanding $16bn: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that such things were not possible. Previously, a senior politician, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this topic described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning is now a reality. In the current period, energy and resource corporations have initiated a historic level of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP