🔗 Share this article

How do you perceive our system of government functions? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Advent of Offshore Tribunals

Nowadays, overseas companies, and the wealthy individuals behind them, can sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including businesses operating from this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums represent not tangible damages but money the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It will be deterred from enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices taken by parliaments is that this clause has been written – without public consent, and often in a climate of extreme secrecy – within bilateral investment treaties.

A Specific Example: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The justice determined that proposals to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no impact on climate commitments. The incoming administration then withdrew the licence the former government had approved. Today, this success faces being overturned by an foreign court accountable to exclusively the companies petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the US capital was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court supports it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him following the Russian aggression. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: half that state's yearly income. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that such things were not possible. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this topic described campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That prediction has now materialised. Recently, energy and extraction companies have filed a unprecedented number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP