🔗 Share this article

What is your reckon our democratic process operates? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Advent of Offshore Tribunals

Today, international firms, or the billionaires behind them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open solely for businesses based overseas.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it can award financial penalties of vast sums, even billions.

These sums constitute not actual losses but money the panel members determine the company would perhaps have made. The government might be compelled to abandon its policy. It is deterred from passing future laws in that area, for fear of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being brought, as firms observe each other, and private equity fund legal actions for a share of a portion of the settlements. The outcome? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Example: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice found that proposals to dig the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the permission the Tories had granted. Currently, this legal outcome is under threat by an secret arbitration panel accountable to exclusively the companies bringing the case.

In August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. We have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the state? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the high court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against another European state for this reason, demanding sixteen billion dollars: an amount representing half state's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this issue labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the power they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That warning has come to pass. This year, energy and resource corporations have lodged a historic level of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to stop global warming. Firms have so far won $114bn by using ISDS, of which energy giants have secured the majority. That represents the combined GDP