🔗 Share this article

Can you understand our democratic process functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is maintained by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, overseas companies, and the wealthy individuals who own them, can sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. The door is open solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but funds the panel members conclude the company would perhaps have made. The administration could be forced to drop the legislation. It is discouraged from passing future laws along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Record numbers of disputes are being brought, as corporations take cues from each other, and private equity finance suits in exchange for a cut of the settlements. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the decisions made by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – into international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The justice found that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had granted. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the companies petitioning it.

In August, a firm whose final controllers reside in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. What legal team is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him after the war in Ukraine. He has filed a claim against another European state for this reason, demanding $16bn: half that government’s yearly budget. Part of the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these scenarios were not possible. In 2014, a government leader, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic accused activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That threat is now a reality. In the current period, energy and extraction companies have initiated a historic level of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to halt global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP