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How do you perceive our political system functions? It could be similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, overseas companies, or the oligarchs behind them, can sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses based in this country. Access is granted only to corporations registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards constitute not actual losses but money the arbitrators conclude the company might otherwise have made. The administration could be forced to drop the legislation. It is discouraged from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of disputes are being initiated, as corporations observe each other, and private equity fund legal actions in return for a portion of the settlements. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by elected bodies is that this provision has been incorporated – absent public approval, and frequently under a climate of total confidentiality – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice determined that plans to open the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The new government later cancelled the permission the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal reporting to exclusively the entities petitioning it.

Last August, a corporate entity whose final controllers are based in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. Which individual is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coalmine case was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK imposed on him following the invasion of Ukraine. He has previously started suing another European state on these grounds, seeking $16bn: half that nation's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with general mockery.

That threat is now a reality. This year, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent climate breakdown. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP