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Can you understand our political system works? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes are enforced by the courts. That's it. However, that was how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, international firms, along with the oligarchs behind them, can sue elected administrations for the laws they pass, at private courts composed of commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. The door is open only to entities operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation are based not on actual losses but funds the tribunal officials determine the company could potentially have made. The government may have to drop the legislation. It becomes deterred from introducing similar legislation in that area, worried about facing litigation.

A System Growing Exponentially

Record numbers of disputes are being initiated, as firms take cues from each other, and hedge funds finance suits in return for a share of the settlements. The consequence? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices taken by parliaments is that this clause has been incorporated – without public consent, and frequently under conditions of extreme secrecy – within international trade agreements.

A Specific Instance: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government later cancelled the licence the previous administration had granted. Currently, this success could be compromised by an foreign court answering to only the entities petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre lodged a claim versus the UK government. Recently a tribunal in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this might be. Which individual is acting on its behalf challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK levied against him following the invasion of Ukraine. He has previously started suing another European state on these grounds, demanding sixteen billion dollars: half that nation's yearly budget. Included in the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this topic described activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations grasp the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That prediction is now a reality. This year, fossil fuel and mining firms have filed a unprecedented number of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have so far won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP