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Can you understand our system of government functions? Perhaps along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that was how it used to work. Those days are over.

The Advent of Offshore Tribunals

Nowadays, international firms, or the wealthy individuals that control them, can sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted behind closed doors. Differing from national judiciaries, these panels provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These awards represent not actual losses but funds the panel members decide the company would perhaps have made. The government might be compelled to drop the legislation. It becomes deterred from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a share of the awards. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions made by parliaments is that this clause has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The justice determined that schemes to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The Labour government then withdrew the licence the former government had granted. Currently, this success could be compromised by an offshore tribunal answering to exclusively the corporations filing the suit.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Which individual is representing it challenging the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a international entity challenges it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was convened, 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 scarce of the case to date, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, demanding a colossal sum: half that nation's yearly budget. Included in the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these scenarios were not possible. Previously, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this matter described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “once firms grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP