🔗 Share this article

Can you perceive our democratic process operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, international firms, along with the billionaires behind them, can sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. They are open only to businesses registered abroad.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not actual losses but money the arbitrators conclude the company would perhaps have made. The administration may have to drop the legislation. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies learn from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The consequence? National sovereignty and democratic governance are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Specific Instance: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The new government then withdrew the licence the previous administration had approved. Today, this legal outcome could be compromised by an foreign court answering to only the corporations bringing the case.

During August, a firm whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. Who is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the court on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Part of the counsel representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this matter described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations grasp the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were met with widespread derision.

That warning has now materialised. Recently, fossil fuel and extraction companies have filed a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – official measures to halt global warming. Firms have so far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP