🔗 Share this article

What is your understand our political system works? It could be along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. However, that’s how it once functioned. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, or the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are conducted behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies based in this country. Access is granted solely for businesses based overseas.

When a secret court determines that a government measure could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These awards constitute not real financial harm but funds the arbitrators determine the company could potentially have made. The administration could be forced to abandon its policy. It is hesitant to passing future laws in that area, for fear of being sued.

A Process Running Rampant

Unprecedented levels of cases are being filed, as firms take cues from each other, and hedge funds fund legal actions for a share of a share of the awards. The consequence? Sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices enacted by parliaments is that this clause has been inserted – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the former government had approved. Currently, this success could be compromised by an offshore tribunal answering to no one but the entities bringing the case.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

The company is suing the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have no clear indication how much this sum represents. Who is representing it against the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him after the Russian aggression. He has previously initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Among the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these events could not occur. Previously, a senior politician, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An expert on this issue accused campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “when companies start to realise the influence they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has now materialised. Recently, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to stop global warming. Corporations have thus far won $114bn through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP