🔗 Share this article

What is your reckon our democratic process operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Rise of Offshore Courts

In the modern era, overseas companies, along with the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts made up of business advocates. These proceedings are held in secret. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. The door is open exclusively to entities based overseas.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but money the panel members conclude the company might otherwise have made. The state may have to rescind the measure. It is deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds bankroll lawsuits in return for a portion of the settlements. The result? Sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The UK Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer determined that plans to dig the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The Labour government subsequently revoked the licence the former government had issued. Today, this success is under threat by an offshore tribunal accountable to only the entities filing the suit.

In August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. Which individual is acting on its behalf against the British government? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him following the Russian aggression. He has previously started suing Luxembourg with similar intent, seeking a colossal sum: equivalent to half of nation's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Costs

The public was told that such things could not occur. Previously, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That threat is now a reality. This year, energy and extraction companies have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – state efforts to stop global warming. Companies have to date won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP