🔗 Share this article

Can you perceive our democratic process works? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Advent of Secret Tribunals

Today, overseas companies, or the billionaires behind them, can sue nation states for the regulations they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. The door is open exclusively to entities registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but money the arbitrators conclude the company would perhaps have made. The administration might be compelled to rescind the measure. It will be discouraged from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies learn from each other, and private equity fund legal actions for a share of a cut of the settlements. The result? Democratic sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the rulings enacted by legislatures is that this stipulation has been inserted – absent public approval, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice determined that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the permission the previous administration had issued. Today, this victory is under threat by an foreign court answering to no one but the companies filing the suit.

In August, a firm whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The state makes a decision, the national judiciary validates it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it appears probable that he’ll use the arbitration process to challenge the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, demanding sixteen billion dollars: an amount representing half nation's annual revenue. Part of the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that such things were not possible. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction is now a reality. This year, energy and resource corporations have filed a record number of claims against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP