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How do you perceive our political system operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, or the oligarchs behind them, can sue elected administrations for the regulations they pass, at private courts composed of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even enterprises based in this country. Access is granted solely for entities registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on actual losses but funds the tribunal officials decide the company would perhaps have made. The administration may have to abandon its policy. It becomes deterred from passing future laws along the same lines, due to the risk of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as corporations take cues from each other, and hedge funds finance suits for a share of a portion of the takings. The consequence? Sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions taken by legislatures is that this provision has been incorporated – without public consent, and typically amid conditions of extreme secrecy – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice ruled that schemes to dig the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The new government later cancelled the licence the Tories had granted. Now, this victory is under threat by an offshore tribunal reporting to exclusively the entities bringing the case.

Last August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this sum represents. Which individual is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case to date, but it appears probable that he may employ the arbitration process to contest the penalties the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation with similar intent, demanding a colossal sum: equivalent to half of state's yearly income. Among the lawyers on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these events were not possible. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this topic accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the power they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That warning is now a reality. This year, oil and gas and mining firms have lodged a unprecedented number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won vast sums via ISDS, of which energy giants have secured the majority. That equates to the combined GDP