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What is your understand our system of government works? It could be something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that was how it used to work. Those days are over.

The Advent of Offshore Tribunals

Today, overseas companies, or the wealthy individuals behind them, can sue nation states for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies based in this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but money the arbitrators determine the company would perhaps have made. The administration might be compelled to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and investment funds finance suits in return for a portion of the awards. The consequence? Sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices taken by legislatures is that this clause has been inserted – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The UK Coalmine

A year ago, activists secured a significant win at the senior court. The judge found that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The Labour government subsequently revoked the permission the former government had issued. Now, this victory faces being overturned by an offshore tribunal accountable to only the companies petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in the United States was convened to adjudicate on it.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. Citizens have no idea how much this could amount to. Which individual is serving as its counsel challenging the state? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking $16bn: equivalent to half of government’s annual revenue. Among the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

The public was told that these scenarios could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the power they now possess, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That prediction is now a reality. Recently, oil and gas and resource corporations have lodged a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP