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Can you understand our system of government functions? Perhaps along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Rise of Offshore Tribunals

In the modern era, international firms, along with the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at private courts staffed by business advocates. Such disputes are held in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses operating from this country. The door is open solely for corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, running into billions.

These awards constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to abandon its policy. It becomes deterred from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as companies take cues from each other, and hedge funds finance suits in return for a share of the takings. The result? National sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The justice determined that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The new government later cancelled the consent the previous administration had approved. Today, this success could be compromised by an foreign court reporting to only the corporations filing the suit.

Last August, a company whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Which individual is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, demanding a colossal sum: half that nation's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms start to realise the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat has now materialised. Recently, energy and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have to date won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP