🔗 Share this article

How do you understand our system of government operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, including enterprises operating from this country. The door is open solely for corporations registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards constitute not actual losses but money the panel members conclude the company might otherwise have made. The government may have to rescind the measure. It becomes deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? Sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the choices taken by elected bodies is that this provision has been written – absent public approval, and typically amid conditions of total confidentiality – within international trade agreements.

A Real-World Example: The UK Coal Mine

Last year, activists secured a significant win at the senior court. The judge found that plans to dig the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the previous administration had granted. Today, this success could be compromised by an offshore tribunal reporting to no one but the entities filing the suit.

During August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he may employ the tribunal to contest the sanctions the UK levied against him following the war in Ukraine. He has initiated proceedings against another European state for this reason, demanding $16bn: an amount representing half government’s annual revenue. Part of the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that these events wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations begin to understand the authority they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, fossil fuel and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to stop global warming. Corporations have to date won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP