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Can you perceive our political system operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that was how it used to work. Not anymore.

The Rise of Offshore Courts

In the modern era, foreign corporations, along with the wealthy individuals that control them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held in secret. Unlike our courts, these panels grant no right of appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These awards are based not on tangible damages but compensation the panel members determine the company might otherwise have made. The government could be forced to rescind the measure. It becomes discouraged from passing future laws of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as firms take cues from each other, and hedge funds finance suits for a share of a portion of the takings. The result? Sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings made by parliaments is that this clause has been incorporated – without public consent, and frequently under conditions of profound opacity – into trade treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that schemes to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the permission the former government had approved. Now, this victory could be compromised by an secret arbitration panel answering to no one but the corporations petitioning it.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the US capital was established to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Lawsuit

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 billionaire, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: half that state's annual revenue. Part of the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

We were assured that these events could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning is now a reality. This year, energy and extraction companies have filed a record number of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Corporations have to date won vast sums through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP