🔗 Share this article

What is your perceive our system of government operates? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Advent of Offshore Courts

In the modern era, foreign corporations, or the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including enterprises headquartered in this country. They are open exclusively to corporations registered abroad.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards represent not real financial harm but money the arbitrators determine the company could potentially have made. The government could be forced to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as firms learn from each other, and private equity bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings made by legislatures is that this clause has been written – without public consent, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had issued. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the entities filing the suit.

During August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in the United States was convened to consider the case.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. Who is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity contests it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he may employ the tribunal to contest the restrictions the UK imposed on him following the war in Ukraine. He has started suing a small nation on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Part of the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in using frozen state funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that these scenarios could not occur. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction is now a reality. In the current period, energy and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP