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Can you reckon our political system functions? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Advent of Offshore Tribunals

Today, international firms, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to businesses registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These awards represent not real financial harm but funds the panel members decide the company would perhaps have made. The administration might be compelled to abandon its policy. It will be deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being brought, as corporations observe each other, and investment funds finance suits in exchange for a portion of the settlements. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the choices made by legislatures is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – within international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The judge found that plans to dig the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the previous administration had approved. Today, this victory faces being overturned by an foreign court accountable to no one but the companies bringing the case.

During August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. Recently a tribunal in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no idea how much this could amount to. Who is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a foreign company contests it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was appointed, we learned 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 to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation with similar intent, seeking a colossal sum: half that nation's annual revenue. Part of the lawyers representing him there? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these scenarios could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter accused activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That threat has come to pass. Recently, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP