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Can you reckon our political system functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Emergence of Offshore Tribunals

Today, foreign corporations, or the wealthy individuals that control them, have the power to sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to rescind the measure. It will be deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of disputes are being filed, as corporations take cues from each other, and private equity finance suits in return for a cut of the awards. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Specific Example: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that schemes to excavate the first new deep coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the licence the Tories had issued. Currently, this success is under threat by an offshore tribunal reporting to only the corporations filing the suit.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the United States was set up to hear it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: half that state's annual revenue. Part of the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that such things were not possible. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies grasp the power they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by general mockery.

That threat is now a reality. This year, oil and gas and resource corporations have lodged a record number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have thus far won vast sums via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP