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Can you understand our system of government works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Rise of Offshore Tribunals

Nowadays, overseas companies, and the billionaires behind them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases are held in secret. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, including businesses headquartered in this country. The door is open exclusively to entities based overseas.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as firms learn from each other, and investment funds fund legal actions for a share of a portion of the takings. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices enacted by legislatures is that this provision has been incorporated – absent public approval, and typically amid conditions of extreme secrecy – into trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the licence the former government had issued. Now, this victory faces being overturned by an secret arbitration panel reporting to no one but the corporations filing the suit.

During August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was convened to hear it.

The claimant is suing the UK for the profits it could have earned if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. What legal team is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that these scenarios wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue described critics of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations should be concerned by ISDS claims. Predictions that “when companies grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning has now materialised. This year, oil and gas and mining firms have filed a record number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP