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Can you reckon our political system functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Emergence of Offshore Courts

Today, overseas companies, and the oligarchs that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals allow 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 operating from this country. The door is open solely for entities operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These awards constitute not tangible damages but money the arbitrators decide the company might otherwise have made. The state might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as companies observe each other, and investment funds bankroll lawsuits in return for a portion of the awards. The consequence? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings enacted by parliaments is that this provision has been inserted – without public consent, and often in a climate of total confidentiality – into international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the high court. The justice determined that plans to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the previous administration had approved. Now, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. Last week a tribunal in the US capital was established to hear it.

This firm is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. The public has little idea how much this might be. Which individual is serving as its counsel challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a international entity disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the court on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg on these grounds, demanding a colossal sum: equivalent to half of nation's yearly budget. Among the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that these events wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies grasp the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by scepticism.

That prediction has now materialised. Recently, fossil fuel and extraction companies have initiated a historic level of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP