🔗 Share this article

Can you understand our system of government operates? It could be similar to this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Rise of Offshore Tribunals

In the modern era, international firms, and the oligarchs that control them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these tribunals provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These sums are based not on real financial harm but money the panel members decide the company might otherwise have made. The state may have to abandon its policy. It will be discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being brought, as companies take cues from each other, and private equity finance suits in return for a portion of the settlements. The consequence? Sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the rulings enacted by parliaments is that this clause has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – into international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the consent the Tories had issued. Now, this legal outcome faces being overturned by an foreign court answering to no one but the corporations filing the suit.

Last August, a company whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was convened to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he may employ the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has started suing another European state with similar intent, seeking a colossal sum: equivalent to half of government’s yearly budget. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That threat has come to pass. This year, fossil fuel and mining firms have lodged a historic level of claims against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt climate breakdown. Companies have so far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP