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Can you perceive our political system works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Today, international firms, along with the oligarchs that control them, can sue nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, including businesses headquartered in this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel rules that a government measure could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These sums constitute not tangible damages but funds the tribunal officials conclude the company would perhaps have made. The state may have to abandon its policy. It becomes deterred from passing future laws in that area, due to the risk of being sued.

A Process Running Rampant

Record numbers of legal actions are being filed, as firms take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The result? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings made by elected bodies is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the consent the Tories had issued. Today, this victory is under threat by an foreign court reporting to only the companies bringing the case.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is suing the UK for the money it might have made if the mine had been permitted to commence operations. We have little idea how much this might be. Which individual is representing it challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company disputes it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it appears probable that he’ll use the tribunal to contest the restrictions the UK levied against him following the invasion of Ukraine. He has already started suing another European state for this reason, demanding sixteen billion dollars: half that state's annual revenue. Among the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that such things could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this issue described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has now materialised. In the current period, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to stop global warming. Firms have so far won vast sums through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP