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What is your understand our political system functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that was how it used to work. Those days are over.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to entities operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These awards represent not real financial harm but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and investment funds fund legal actions in exchange for a cut of the takings. The outcome? National sovereignty and democratic governance are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the rulings made by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under conditions of total confidentiality – into trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer determined that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the permission the Tories had granted. Now, this victory could be compromised by an secret arbitration panel reporting to exclusively the entities filing the suit.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in Washington DC 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. We have little idea how much this could amount to. Who is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case to date, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK enacted against him following the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Among the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that such things wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this matter accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has now materialised. This year, fossil fuel and resource corporations have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP