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What is your perceive our political system operates? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, and the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open solely for businesses operating from foreign soil.

When a secret court rules that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, running into billions.

These awards constitute not tangible damages but money the tribunal officials decide the company could potentially have made. The government might be compelled to rescind the measure. It will be discouraged from enacting future policies along the same lines, worried about being sued.

A System Growing Exponentially

Historically high figures of cases are being initiated, as corporations learn from each other, and hedge funds fund legal actions in return for a share of the takings. The result? Democratic sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the licence the previous administration had issued. Currently, this victory could be compromised by an offshore tribunal accountable to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a foreign company contests it through an secretive private court, and a elected official represents its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK imposed on him after the war in Ukraine. He has already started suing another European state for this reason, seeking a colossal sum: half that state's yearly income. Among the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized state funds as security for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Threats

Politicians promised that such things were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An expert on this topic described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That threat is now a reality. Recently, oil and gas and extraction companies have lodged a record number of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP