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What is your understand our system of government functions? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is upheld by the courts. That's it. Yet, that used to be how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, along with the oligarchs who own them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted only to businesses based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but funds the arbitrators conclude the company would perhaps have made. The state might be compelled to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations learn from each other, and investment funds fund legal actions in exchange for a cut of the awards. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices made by parliaments is that this stipulation has been written – without public consent, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the permission the Tories had issued. Today, this victory could be compromised by an foreign court accountable to no one but the corporations bringing the case.

Last August, a corporate entity whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. Which individual is acting on its behalf against the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against another European state for this reason, demanding a colossal sum: equivalent to half of government’s yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that these scenarios were not possible. Previously, a senior politician, championing the most significant and hazardous of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this topic accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “when companies begin to understand the influence they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and mining firms have initiated a record number of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – official measures to stop global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP