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Can you perceive our political system operates? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

Today, international firms, and the billionaires behind them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held in secret. Unlike our courts, these tribunals provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to entities based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The state might be compelled to abandon its policy. It becomes hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings made by parliaments is that this clause has been incorporated – without public consent, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice found that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Today, this success is under threat by an foreign court answering to exclusively the companies filing the suit.

During August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Who is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against another European state for this reason, claiming sixteen billion dollars: half that nation's yearly budget. Part of the counsel on his side? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that these events were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this topic labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That warning is now a reality. In the current period, oil and gas and mining firms have filed a unprecedented number of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to halt climate breakdown. Corporations have to date won $114bn by using ISDS, of which oil majors have secured the majority. That represents the combined GDP