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Can you reckon our political system functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, or the oligarchs behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. Unlike our courts, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, just as our government, including businesses based in this country. They are open solely for entities registered abroad.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards represent not actual losses but compensation the arbitrators conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being brought, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the settlements. The outcome? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions taken by elected bodies is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer determined that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had approved. Now, this legal outcome is under threat by an foreign court reporting to exclusively the corporations filing the suit.

Last August, a company whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is serving as its counsel challenging the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Included in the lawyers representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this matter described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That threat has come to pass. In the current period, oil and gas and mining firms have lodged a unprecedented number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP