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What is your understand our political system operates? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, international firms, along with the billionaires who own them, can sue nation states for the policies they pass, at offshore tribunals staffed by business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but money the arbitrators decide the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being filed, as companies observe each other, and private equity fund legal actions in exchange for a portion of the takings. The outcome? National sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices made by legislatures is that this provision has been incorporated – without public consent, and typically amid conditions of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice determined that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government subsequently revoked the consent the former government had approved. Today, this legal outcome is under threat by an offshore tribunal reporting to only the corporations bringing the case.

In August, a corporate entity whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in the United States was convened to consider the case.

The claimant is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf against the British government? A member of parliament, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the penalties the UK levied against him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, claiming $16bn: equivalent to half of state's yearly income. Part of the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter accused campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Predictions that “once firms begin to understand the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. In the current period, fossil fuel and resource corporations have lodged a record number of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent climate breakdown. Companies have to date won $114bn through ISDS, of which oil majors have secured the majority. That represents the combined GDP