🔗 Share this article

How do you reckon our system of government operates? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Emergence of Secret Tribunals

In the modern era, foreign corporations, along with the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to businesses registered abroad.

If a tribunal finds that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions, running into billions.

This compensation constitute not tangible damages but funds the tribunal officials decide the company could potentially have made. The state could be forced to drop the legislation. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the settlements. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the rulings taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – into trade treaties.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the High Court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the consent the Tories had approved. Now, this success faces being overturned by an offshore tribunal answering to no one but the entities bringing the case.

In August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have no clear indication how much this might be. Which individual is serving as its counsel challenging the state? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a foreign company challenges it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case at present, but it appears probable that he may employ the tribunal to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against another European state for this reason, demanding a colossal sum: equivalent to half of government’s yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen state funds as security for its financial support package is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Mounting Risks

We were assured that such things were not possible. Years ago, a senior politician, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to prevent environmental catastrophe. Firms have to date won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP