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How do you perceive our political system works? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it used to work. Those days are over.

The Rise of Offshore Tribunals

In the modern era, international firms, along with the billionaires that control them, can sue 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 bodies provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even enterprises based in this country. They are open only to businesses registered abroad.

When a secret court finds that a government measure could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but compensation the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to passing future laws of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as firms take cues from each other, and investment funds fund legal actions in return for a share of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices made by legislatures is that this provision has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – into international trade agreements.

A Specific Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the licence the previous administration had approved. Today, this legal outcome is under threat by an offshore tribunal accountable to only the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the court on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has filed a claim against another European state for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Among the legal team representing him there? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that these events were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this issue accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “once firms begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has now materialised. This year, oil and gas and mining firms have initiated a record number of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP