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How do you perceive our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Arbitration Panels

Nowadays, foreign corporations, and the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place in secret. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. The door is open solely for entities operating from foreign soil.

If a tribunal rules that a law or policy may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

This compensation represent not actual losses but funds the arbitrators decide the company would perhaps have made. The state may have to drop the legislation. It is discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as firms take cues from each other, and hedge funds finance suits in exchange for a cut of the takings. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings made by parliaments is that this provision has been incorporated – without public consent, and often in an atmosphere of total confidentiality – within trade treaties.

A Real-World Instance: The UK Coal Mine

A year ago, a conservation group won a great victory at the senior court. The justice determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on climate commitments. The new government later cancelled the consent the Tories had approved. Today, this success faces being overturned by an foreign court accountable to only the entities filing the suit.

During August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had received permission to proceed. The public has no clear indication how much this might be. Who is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he may employ the tribunal to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: equivalent to half of government’s annual revenue. Among the legal team representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this topic accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations grasp the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and resource corporations have lodged a record number of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have to date won $114bn by using ISDS, of which energy giants have secured $84bn. That represents the combined GDP