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What is your understand our political system works? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at private courts composed of corporate lawyers. Such disputes are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, including companies operating from this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but funds the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from enacting future policies in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of disputes are being filed, as firms observe each other, and private equity finance suits in exchange for a share of the takings. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings enacted by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had approved. Currently, this success faces being overturned by an offshore tribunal accountable to only the companies bringing the case.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was convened to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has little idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case so far, but it appears probable that he may employ the arbitration process to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, demanding $16bn: equivalent to half of government’s annual revenue. Among the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Warnings that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That warning is now a reality. Recently, oil and gas and extraction companies have lodged a unprecedented number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP