🔗 Share this article

Can you perceive our democratic process functions? It could be something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

In the modern era, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at private courts made up of business advocates. The cases take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted solely for corporations based overseas.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These sums are based not on actual losses but funds the panel members decide the company could potentially have made. The state may have to rescind the measure. It is hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations observe each other, and private equity fund legal actions in exchange for a cut of the settlements. The result? Democratic sovereignty and democracy are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices taken by parliaments is that this stipulation has been written – absent public approval, and frequently under conditions of total confidentiality – within trade treaties.

A Specific Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice found that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the Tories had issued. Today, this success could be compromised by an offshore tribunal answering to only the entities petitioning it.

In August, a firm whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. We have little idea how much this sum represents. Which individual is acting on its behalf challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court validates it, then a international entity challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of state's annual revenue. Included in the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that such things wouldn’t happen. Previously, a government leader, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this issue labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about such legal actions. Predictions that “as corporations start to realise the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were greeted by scepticism.

That prediction has now materialised. In the current period, energy and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Corporations have to date won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP