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How do you understand our political system operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Advent of Offshore Courts

Today, overseas companies, along with the billionaires who own them, are able to litigate against nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises based in this country. The door is open only to corporations registered abroad.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not actual losses but compensation the tribunal officials decide the company might otherwise have made. The government could be forced to drop the legislation. It will be hesitant to passing future laws along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as firms take cues from each other, and hedge funds fund legal actions in exchange for a share of the takings. The consequence? Sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the choices taken by elected bodies is that this clause has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Case: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The Labour government then withdrew the consent the Tories had approved. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the entities petitioning it.

Last August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The company is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. What legal team is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a international entity contests it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case to date, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has started suing another European state on these grounds, demanding sixteen billion dollars: half that state's yearly income. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Costs

We were assured that these scenarios were not possible. Previously, a senior politician, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An expert on this matter labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and mining firms have lodged a record number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP