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What is your reckon our political system operates? It could be similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, and the oligarchs who own them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these panels provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the panel members decide the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as firms observe each other, and private equity bankroll lawsuits in return for a portion of the awards. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this clause has been written – absent public approval, and typically amid conditions of profound opacity – into trade treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, activists won a great victory at the High Court. The presiding officer found that plans to dig the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the permission the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal accountable to no one but the entities bringing the case.

Last August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is acting on its behalf against the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against a small nation with similar intent, demanding a colossal sum: an amount representing half state's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this issue labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That threat has come to pass. Recently, fossil fuel and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Firms have to date won $114bn through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP