Hello, Overseas Magnates and Corporations! Kindly Come and Litigate Against the UK for Billions of Pounds.
What is your reckon our political system works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it operated in the past. No longer.
The Emergence of Offshore Courts
Today, overseas companies, along with the billionaires who own them, can sue elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted only to corporations based overseas.
When a secret court rules that a government measure may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.
These sums are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be deterred from introducing similar legislation of a similar nature, for fear of being sued.
A Process Spiralling Out of Control
Record numbers of legal actions are being initiated, as corporations observe each other, and investment funds finance suits in return for a portion of the takings. The outcome? National sovereignty and popular rule are becoming too costly.
The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices made by legislatures is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.
A Concrete Example: The Whitehaven Coal Mine
Last year, activists won a great victory at the High Court. The justice determined that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The new government later cancelled the consent the previous administration had issued. Now, this success is under threat by an offshore tribunal accountable to no one but the corporations bringing the case.
Last August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. Recently a tribunal in Washington DC was convened to consider the case.
The company is suing the UK for the profits it might have made if the mine had been permitted to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel against the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an secretive private court, and a elected official works for its behalf.
An Oligarch's Challenge
On the same day that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK enacted against him following the Russian aggression. He has already filed a claim against another European state for this reason, claiming a colossal sum: an amount representing half state's yearly budget. Among the legal team representing him there? the wife of a former prime minister, spouse of the previous PM.
Legal experts argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.
Misleading Claims and Growing Costs
We were assured that these events could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this topic described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “as corporations 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 general mockery.
That warning has now materialised. This year, oil and gas and mining firms have filed a record number of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to halt climate breakdown. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP