🔗 Share this article

What is your perceive our political system functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Courts

Nowadays, foreign corporations, or the billionaires behind them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels provide no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted exclusively to entities based overseas.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

These sums represent not tangible damages but funds the tribunal officials conclude the company could potentially have made. The state may have to abandon its policy. It will be hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions taken by parliaments is that this clause has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice found that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The Labour government then withdrew the licence the Tories had approved. Today, this victory is under threat by an foreign court accountable to only the entities petitioning it.

Last August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is acting on its behalf against the state? A member of parliament, and former attorney-general in the previous government, the noted patriot the MP. The state passes a law, the national judiciary validates it, then a international entity disputes it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him after the invasion of Ukraine. He has previously initiated proceedings against another European state for this reason, seeking sixteen billion dollars: half that government’s annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen state funds as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these scenarios were not possible. In 2014, a government leader, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this matter labelled critics of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction is now a reality. Recently, energy and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to halt environmental catastrophe. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP