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Can you reckon our political system works? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open solely for businesses registered abroad.

When a secret court finds that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

These awards represent not actual losses but money the panel members determine the company might otherwise have made. The state could be forced to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and hedge funds fund legal actions in return for a portion of the takings. The consequence? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions made by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of profound opacity – into international trade agreements.

A Specific Case: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The justice found that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government later cancelled the consent the previous administration had granted. Today, this legal outcome faces being overturned by an offshore tribunal accountable to only the companies filing the suit.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in the US capital was set up to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this might be. Which individual is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already filed a claim against a small nation for this reason, demanding a colossal sum: an amount representing half government’s yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Risks

We were assured that such things were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms begin to understand the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That prediction has now materialised. Recently, fossil fuel and mining firms have filed a historic level of claims against nations rich and poor, opposing – similar to the Whitehaven project – government attempts to stop global warming. Corporations have thus far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP