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Can you perceive our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Advent of Offshore Tribunals

In the modern era, international firms, and the billionaires that control them, can sue nation states for the policies they pass, at private courts composed of business advocates. These proceedings are held in secret. In contrast to domestic courts, these tribunals allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, including enterprises operating from this country. They are open only to corporations registered abroad.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These awards represent not tangible damages but compensation the tribunal officials determine the company might otherwise have made. The administration may have to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as corporations observe each other, and private equity finance suits in return for a portion of the settlements. The outcome? Sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the rulings enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the senior court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration then withdrew the permission the previous administration had issued. Now, this legal outcome faces being overturned by an offshore tribunal reporting to only the entities petitioning it.

During August, a company whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to commence operations. We have little idea how much this could amount to. What legal team is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was established, we learned from a government response 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 seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has filed a claim against a small nation on these grounds, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that such things could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies start to realise the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. In the current period, oil and gas and mining firms have initiated a record number of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP