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How do you reckon our political system operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. When a majority is obtained, 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 Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. They are open solely for businesses based overseas.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, potentially billions.

This compensation represent not tangible damages but money the panel members determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The consequence? National sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the consent the previous administration had approved. Currently, this success could be compromised by an offshore tribunal answering to no one but the corporations filing the suit.

Last August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. Who is representing it against the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement 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 will utilise the tribunal to contest the restrictions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: half that nation's annual revenue. Part of the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that these events were not possible. Years ago, a government leader, championing the most significant and hazardous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this matter accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. In the current period, fossil fuel and resource corporations have initiated a record number of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP