🔗 Share this article

What is your reckon our democratic process operates? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Offshore Courts

In the modern era, international firms, along with the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. Such disputes take place in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to corporations registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These sums are based not on actual losses but money the panel members conclude the company would perhaps have made. The government could be forced to drop the legislation. It will be hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as corporations observe each other, and private equity fund legal actions in return for a cut of the takings. The consequence? Democratic sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the choices taken by elected bodies is that this clause has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that proposals to open the first major coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government later cancelled the consent the former government had granted. Currently, this victory faces being overturned by an foreign court answering to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company disputes it through an secretive private court, and a elected official represents its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him following the war in Ukraine. He has initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of state's yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. Years ago, a government leader, championing the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “once firms grasp the authority they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That threat has now materialised. Recently, oil and gas and resource corporations have initiated a record number of suits against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP