🔗 Share this article

What is your understand our system of government operates? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. Yet, that used to be how it once functioned. No longer.

The Rise of Offshore Courts

In the modern era, overseas companies, and the wealthy individuals behind them, are able to litigate against nation states for the laws they pass, at private courts staffed by commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including enterprises operating from this country. Access is granted exclusively to corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant compensation of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It will be hesitant to passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The result? Sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions made by parliaments is that this provision has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice determined that plans to dig the first major coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the licence the former government had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to exclusively the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. We have little idea how much this might be. Who is representing it against the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a international entity disputes it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it seems likely that he may employ the tribunal to fight the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against another European state on these grounds, demanding $16bn: equivalent to half of state's annual revenue. Included in the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that such things could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this issue described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning is now a reality. Recently, oil and gas and extraction companies have initiated a historic level of cases against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP