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What is your understand our political system works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that was how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, and the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at private courts made up of commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. The door is open solely for businesses based overseas.

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

These sums constitute not actual losses but funds the tribunal officials decide the company would perhaps have made. The state may have to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity fund legal actions in return for a cut of the awards. The result? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the choices enacted by legislatures is that this clause has been inserted – without democratic mandate, and often in conditions of profound opacity – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, activists won a great victory at the High Court. The judge ruled that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the Tories had issued. Currently, this success faces being overturned by an foreign court answering to exclusively the corporations petitioning it.

Last August, a corporate entity whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was established to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this might be. Which individual is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him following the Russian aggression. He has previously initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that such things could not occur. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, stated: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this matter labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Predictions that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Firms have to date won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP