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How do you understand our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. That's it. Well, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, and the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by business advocates. The cases take place in secret. Differing from national judiciaries, these bodies provide no right of appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies based in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

This compensation are based not on tangible damages but money the tribunal officials determine the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and hedge funds fund legal actions in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the choices taken by legislatures is that this stipulation has been inserted – without public consent, and often in an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government subsequently revoked the permission the Tories had approved. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a firm whose beneficial owners are located in the tax haven initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was convened to hear it.

This firm is suing the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. Who is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the high court supports it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the sanctions the UK levied against him following the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming a colossal sum: an amount representing half nation's annual revenue. Among the legal team representing him there? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. This year, oil and gas and resource corporations have initiated a historic level of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to halt climate breakdown. Firms have so far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP