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Can you perceive our political system functions? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Rise of Offshore Tribunals

In the modern era, international firms, or the oligarchs who own them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases take place in secret. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation constitute not actual losses but money the tribunal officials determine the company would perhaps have made. The government might be compelled to abandon its policy. It will be discouraged from passing future laws along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being brought, as corporations observe each other, and hedge funds finance suits in exchange for a share of the awards. The result? National sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices taken by legislatures is that this stipulation has been incorporated – without public consent, and often in a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the senior court. The justice found that plans to open the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration later cancelled the consent the former government had approved. Today, this legal outcome could be compromised by an foreign court answering to no one but the corporations filing the suit.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. Who is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, demanding a colossal sum: half that state's yearly budget. Part of the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized Russian assets as security for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Threats

We were assured that these scenarios could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That threat has come to pass. In the current period, fossil fuel and extraction companies have initiated a record number of suits against nations across the economic spectrum, opposing – similar to the UK mine – official measures to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP