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What is your understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Emergence of Offshore Tribunals

Today, overseas companies, along with the wealthy individuals that control them, have the power to sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses based in this country. Access is granted only to entities based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

These awards constitute not actual losses but money the arbitrators determine the company might otherwise have made. The state may have to abandon its policy. It will be hesitant to enacting future policies along the same lines, for fear of facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a share of the awards. The consequence? Democratic sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of total confidentiality – into international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this victory faces being overturned by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a firm whose final controllers are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to proceed. We have no idea how much this could amount to. Who is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it seems likely that he may employ the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has filed a claim against a small nation on these grounds, claiming a colossal sum: half that government’s annual revenue. Among the lawyers representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Risks

Politicians promised that these scenarios could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has now materialised. In the current period, oil and gas and resource corporations have filed a historic level of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have thus far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP