🔗 Share this article

What is your understand our system of government works? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it used to work. No longer.

The Rise of Offshore Courts

Today, overseas companies, or the wealthy individuals who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. Access is granted solely for corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions, even billions.

This compensation represent not tangible damages but funds the arbitrators decide the company might otherwise have made. The state could be forced to drop the legislation. It is discouraged from enacting future policies in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as firms take cues from each other, and hedge funds fund legal actions in exchange for a share of the takings. The outcome? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and often in conditions of profound opacity – within trade treaties.

A Specific Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government then withdrew the licence the former government had issued. Today, this victory could be compromised by an foreign court reporting to no one but the entities bringing the case.

In August, a firm whose final controllers are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to commence operations. We have little idea how much this might be. What legal team is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK imposed on him subsequent to the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming $16bn: half that nation's yearly income. Part of the counsel on his side? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that such things were not possible. In 2014, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “We’ve signed trade deal upon trade deal and there has not been a issue in the past.” An adviser on this matter labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and mining firms have filed a record number of suits against nations rich and poor, opposing – as in the case of the UK mine – state efforts to prevent climate breakdown. Corporations have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP