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How do you reckon our system of government functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, foreign corporations, or the billionaires behind them, can sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels allow no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open only to entities based overseas.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the tribunal officials decide the company would perhaps have made. The state may have to rescind the measure. It is discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A System Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The consequence? National sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices taken by legislatures is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Example: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had approved. Today, this victory is under threat by an secret arbitration panel reporting to only the entities petitioning it.

During August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a international entity contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

Concurrently that the court on the coal mine dispute was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half state's annual revenue. Among the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this matter described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “when companies begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning has come to pass. This year, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP