🔗 Share this article

What is your reckon our democratic process works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Advent of Offshore Courts

Nowadays, international firms, along with the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these panels provide no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to entities registered abroad.

When a secret court determines that a government measure could harm the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation constitute not tangible damages but funds the panel members decide the company could potentially have made. The government might be compelled to abandon its policy. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Running Rampant

Record numbers of cases are being filed, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the settlements. The consequence? Democratic sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices made by legislatures is that this provision has been inserted – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The UK Coal Mine

A year ago, activists won a great victory at the high court. The judge determined that proposals to dig the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration then withdrew the licence the previous administration had issued. Currently, this legal outcome could be compromised by an secret arbitration panel answering to only the corporations petitioning it.

Last August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The state makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing another European state with similar intent, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a record number of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which oil majors have secured $84bn. That represents the combined GDP