🔗 Share this article

Can you reckon our democratic process operates? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs that control them, have the power to sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. The cases are held in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies based in this country. They are open exclusively to corporations registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but money the tribunal officials determine the company might otherwise have made. The government could be forced to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies observe each other, and private equity fund legal actions in exchange for a share of the awards. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions taken by parliaments is that this clause has been written – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Concrete Example: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The judge found that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the licence the former government had approved. Currently, this success could be compromised by an foreign court reporting to exclusively the companies bringing the case.

During August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. We have little idea how much this might be. Who is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it seems likely that he may employ the arbitration process to fight the restrictions the UK levied against him after the war in Ukraine. He has started suing a small nation for this reason, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Among the lawyers representing him there? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as security for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that these events were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An expert on this topic described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has come to pass. In the current period, oil and gas and extraction companies have lodged a record number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP