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What is your perceive our system of government operates? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Yet, that’s how it used to work. No longer.

The Rise of Offshore Tribunals

In the modern era, overseas companies, or the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, or even businesses based in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but money the panel members conclude the company would perhaps have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, worried about being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits in return for a portion of the takings. The result? Sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices enacted by elected bodies is that this clause has been inserted – absent public approval, and frequently under a climate of extreme secrecy – into international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the consent the former government had approved. Today, this victory is under threat by an foreign court accountable to no one but the entities filing the suit.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, demanding a colossal sum: equivalent to half of state's yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms start to realise the influence they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That warning is now a reality. Recently, oil and gas and mining firms have initiated a record number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Firms have thus far won $114bn through ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP