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Can you perceive our political system operates? Maybe similar to this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Rise of Offshore Tribunals

Today, foreign corporations, along with the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at private courts made up of corporate lawyers. Such disputes take place behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, including enterprises based in this country. They are open solely for businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums represent not tangible damages but funds the panel members decide the company might otherwise have made. The administration might be compelled to abandon its policy. It is deterred from enacting future policies along the same lines, worried about being sued.

A Process Growing Exponentially

Historically high figures of disputes are being filed, as companies take cues from each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions enacted by elected bodies is that this clause has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside trade treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The new government then withdrew the consent the Tories had granted. Today, this legal outcome faces being overturned by an secret arbitration panel answering to only the entities petitioning it.

In August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

The company is suing the UK for the money it might have made if the mine had been allowed to proceed. We have little idea how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The state makes a decision, the high court upholds it, then a foreign company challenges it through an unaccountable private court, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK levied against him following the Russian aggression. He has already started suing Luxembourg on these grounds, demanding $16bn: equivalent to half of state's yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that these events could not occur. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to prevent climate breakdown. Firms have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP