🔗 Share this article

Can you reckon our democratic process functions? It could be similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that was how it used to work. No longer.

The Advent of Offshore Courts

Nowadays, foreign corporations, or the wealthy individuals behind them, can sue elected administrations for the policies they pass, at private courts composed of commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted solely for corporations based overseas.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

These awards constitute not tangible damages but funds the arbitrators decide the company would perhaps have made. The government might be compelled to drop the legislation. It is discouraged from introducing similar legislation in that area, worried about being sued.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as companies take cues from each other, and investment funds finance suits for a share of a share of the takings. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – inside international trade agreements.

A Specific Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice determined that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the licence the former government had granted. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the entities bringing the case.

During August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. We have little idea how much this sum represents. Who is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration passes a law, the high court validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it seems likely that he will utilise the tribunal to contest the penalties the UK enacted against him subsequent to the war in Ukraine. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: equivalent to half of nation's annual revenue. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these scenarios were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An expert on this issue described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “once firms start to realise the authority they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has now materialised. In the current period, fossil fuel and mining firms have filed a unprecedented number of suits against nations rich and poor, contesting – like the example of the UK mine – government attempts to prevent climate breakdown. Firms have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP