🔗 Share this article

What is your perceive our democratic process works? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that was how it used to work. Those days are over.

The Advent of Offshore Tribunals

Nowadays, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including enterprises headquartered in this country. They are open exclusively to corporations 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, running into billions.

These awards represent not actual losses but funds the panel members decide the company could potentially have made. The government could be forced to drop the legislation. It will be discouraged from enacting future policies in that area, worried about being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The consequence? Sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices made by elected bodies is that this provision has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – inside international trade agreements.

A Real-World Example: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer determined that proposals to open the first deep coalmine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the consent the previous administration had approved. Today, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the corporations filing the suit.

In August, a firm whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this could amount to. Who is serving as its counsel against the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half nation's yearly income. Part of the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized state funds as collateral for its financial support package stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

We were assured that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” An expert on this matter accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies grasp the authority they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction has come to pass. Recently, energy and extraction companies have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Corporations have so far won vast sums via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP