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How do you perceive our system of government functions? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Rise of Offshore Tribunals

Nowadays, international firms, along with the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes are held in secret. Differing from national judiciaries, these bodies allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including enterprises based in this country. The door is open only to entities registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

These sums constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The administration could be forced to rescind the measure. It will be discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as firms learn from each other, and investment funds fund legal actions for a share of a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings taken by legislatures is that this clause has been written – without democratic mandate, and typically amid conditions of total confidentiality – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer determined that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government then withdrew the consent the previous administration had issued. Today, this victory is under threat by an foreign court answering to no one but the corporations bringing the case.

In August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in the United States was established to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he will utilise the arbitration process to fight the penalties the UK imposed on him after the invasion of Ukraine. He has filed a claim against another European state on these grounds, seeking a colossal sum: equivalent to half of state's annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that such things could not occur. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this topic described campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Warnings that “when companies grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction is now a reality. This year, oil and gas and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP