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What is your perceive our system of government operates? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, or the wealthy individuals behind them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies operating from this country. Access is granted solely for corporations registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but money the tribunal officials determine the company might otherwise have made. The government could be forced to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings made by legislatures is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, activists won a great victory at the senior court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The incoming administration later cancelled the consent the Tories had approved. Today, this success is under threat by an offshore tribunal reporting to no one but the companies petitioning it.

During August, a company whose beneficial owners reside in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

This firm is suing the UK for the profits it would have generated if the mine had received permission to proceed. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a international entity challenges it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, seeking $16bn: an amount representing half government’s yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies start to realise the power they now possess, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That prediction has come to pass. This year, energy and mining firms have filed a historic level of claims against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP