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What is your understand our political system functions? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Advent of Offshore Courts

Today, international firms, and the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted solely for corporations registered abroad.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These sums represent not actual losses but funds the tribunal officials conclude the company could potentially have made. The state could be forced to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms observe each other, and private equity fund legal actions in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions enacted by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Specific Case: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the high court. The justice determined that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The new government later cancelled the consent the former government had granted. Currently, this success faces being overturned by an foreign court answering to no one but the corporations filing the suit.

Last August, a company whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. Which individual is representing it challenging the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation for this reason, seeking sixteen billion dollars: half that state's annual revenue. Part of the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this issue described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms grasp the authority they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That prediction is now a reality. Recently, oil and gas and mining firms have initiated a record number of claims against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – official measures to stop global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP