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Can you understand our political system operates? Perhaps something like this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, overseas companies, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. They are open only to entities based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation represent not real financial harm but funds the panel members determine the company would perhaps have made. The government could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds fund legal actions in exchange for a portion of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions made by elected bodies is that this clause has been written – without democratic mandate, and often in an atmosphere of extreme secrecy – within trade treaties.

A Specific Example: The UK Coal Mine

Last year, a conservation group secured a significant win at the High Court. The justice ruled that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration subsequently revoked the consent the former government had issued. Today, this success is under threat by an offshore tribunal reporting to exclusively the corporations bringing the case.

Last August, a company whose ultimate owners are based in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the United States was set up to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to proceed. We have little idea how much this sum represents. Who is acting on its behalf against the state? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary validates it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it is highly possible that he will utilise the arbitration process to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation on these grounds, demanding sixteen billion dollars: half that state's yearly budget. Included in the lawyers representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these events were not possible. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. Recently, oil and gas and extraction companies have lodged a record number of suits against nations rich and poor, contesting – similar to the UK mine – state efforts to stop global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP