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What is your reckon our political system operates? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Well, that’s how it used to work. No longer.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, and the wealthy individuals who own them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted only to entities registered abroad.

When a secret court rules that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, even billions.

This compensation are based not on tangible damages but money the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It is deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being filed, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the takings. The outcome? Democratic sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings enacted by legislatures is that this provision has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government later cancelled the consent the former government had granted. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the corporations petitioning it.

Last August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in Washington DC was established to consider the case.

The company is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a overseas corporation contests it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of government’s annual revenue. Among the lawyers representing him there? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that such things could not occur. Years ago, a government leader, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this issue accused critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations start to realise the power they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. Recently, energy and resource corporations have filed a historic level of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP