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What is your understand our political system operates? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it used to work. Those days are over.

The Advent of Offshore Courts

In the modern era, overseas companies, and the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. The general public cannot take a case to them, just as our government, or even businesses based in this country. The door is open only to entities operating from foreign soil.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

This compensation represent not actual losses but funds the panel members decide the company could potentially have made. The state could be forced to drop the legislation. It will be discouraged from enacting future policies along the same lines, due to the risk of being sued.

A Process Running Rampant

Historically high figures of disputes are being filed, as corporations learn from each other, and private equity fund legal actions for a share of a share of the settlements. The result? National sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the decisions enacted by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in a climate of total confidentiality – into trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The incoming administration then withdrew the licence the previous administration had issued. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the companies filing the suit.

Last August, a firm whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing Luxembourg for this reason, seeking a colossal sum: equivalent to half of nation's yearly income. Included in the legal team representing him there? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that these events were not possible. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this matter labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That prediction is now a reality. This year, fossil fuel and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to halt climate breakdown. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP