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Can you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Well, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Courts

In the modern era, foreign corporations, and the oligarchs behind them, can sue elected administrations for the laws they pass, at private courts made up of corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation are based not on real financial harm but money the panel members decide the company could potentially have made. The state might be compelled to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a portion of the awards. The outcome? Democratic sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the choices made by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The new government later cancelled the consent the previous administration had issued. Currently, this success could be compromised by an offshore tribunal reporting to no one but the entities petitioning it.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. What legal team is representing it against the state? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him following the Russian aggression. He has started suing a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “when companies grasp the power they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has come to pass. Recently, oil and gas and resource corporations have initiated a record number of cases against nations rich and poor, opposing – similar to the UK mine – official measures to halt environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP