🔗 Share this article

What is your reckon our democratic process functions? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. Legislation is upheld by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Offshore Courts

Today, foreign corporations, or the billionaires behind them, are able to litigate against nation states for the regulations they pass, at private courts composed of business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted exclusively to corporations based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These awards constitute not actual losses but money the panel members decide the company would perhaps have made. The administration could be forced to drop the legislation. It is deterred from enacting future policies in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds finance suits for a share of a portion of the takings. The outcome? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices made by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of total confidentiality – within international trade agreements.

A Real-World Case: The UK Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that plans to dig the first major coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the licence the previous administration had approved. Now, this success could be compromised by an foreign court reporting to exclusively the companies filing the suit.

Last August, a company whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: half that state's yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these events could not occur. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has never been a case in the past.” An expert on this matter accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – official measures to stop global warming. Corporations have so far won vast sums via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP