How do you understand our democratic process functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.
Nowadays, international firms, along with the oligarchs who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to businesses based overseas.
When a secret court rules that a government measure may compromise the corporationās expected profits, it can award compensation of vast sums, potentially billions.
These sums constitute not tangible damages but compensation the arbitrators decide the company would perhaps have made. The administration may have to drop the legislation. It will be discouraged from passing future laws in that area, due to the risk of facing litigation.
Record numbers of legal actions are being brought, as firms learn from each other, and private equity fund legal actions for a share of a cut of the awards. The outcome? Democratic sovereignty and popular rule are turning into too costly.
The process is referred to as āinvestor-state dispute settlementā (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by legislatures is that this provision has been incorporated ā without democratic mandate, and typically amid conditions of extreme secrecy ā inside bilateral investment treaties.
A year ago, activists won a great victory at the High Court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the former government had issued. Today, this victory is under threat by an offshore tribunal answering to only the entities bringing the case.
Last August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was established to consider the case.
The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this might be. Who is serving as its counsel in opposition to the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.
On the same day that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case to date, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him after the Russian aggression. He has initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: half that nation's yearly income. Among the lawyers representing him there? the wife of a former prime minister, wife of the previous PM.
International law scholars argue that the EUās hesitation in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to Belgiumās fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.
We were assured that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, stated: āThe UK has signed investment treaty after trade deal and we have never seen a problem in the past.ā An adviser on this issue described activists of āscaremongering ā¦ the truth is, ISDS has little impact on the UK muchā. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Predictions that āwhen companies grasp the power theyāve been granted, they will turn their attention from the weak nations to the developed economiesā were met with scepticism.
That prediction has now materialised. In the current period, energy and mining firms have filed a historic level of suits against nations rich and poor, contesting ā like the example of the UK mine ā government attempts to stop global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP
Elena Hartwell is a multidisciplinary artist and educator passionate about fostering creative communities in London.