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Can you reckon our political system works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Yet, that was how it operated in the past. No longer.

The Rise of Offshore Tribunals

Nowadays, international firms, or the oligarchs who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place in secret. Unlike our courts, these panels grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including businesses operating from this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it may order damages of vast sums, running into billions.

These awards constitute not tangible damages but compensation the panel members determine the company might otherwise have made. The state may have to rescind the measure. It is discouraged from enacting future policies along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? National sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions made by legislatures is that this stipulation has been written – absent public approval, and frequently under a climate of total confidentiality – within trade treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the permission the previous administration had issued. Now, this success could be compromised by an foreign court reporting to exclusively the companies petitioning it.

Last August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the money it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. Which individual is representing it challenging the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot the MP. The administration makes a decision, the domestic court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s yearly budget. Among the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Growing Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this matter described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms start to realise the power they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and resource corporations have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop environmental catastrophe. Firms have so far won vast sums through ISDS, of which energy giants have obtained the majority. That represents the combined GDP