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How do you understand our system of government works? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. However, that was how it used to work. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, and the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at private courts staffed by business advocates. Such disputes are held behind closed doors. Unlike our courts, these panels provide no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises based in this country. They are open exclusively to corporations registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions, potentially billions.

This compensation are based not on real financial harm but compensation the panel members determine the company might otherwise have made. The state may have to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and hedge funds finance suits in return for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings taken by legislatures is that this clause has been written – without democratic mandate, and typically amid conditions of extreme secrecy – into trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge ruled that plans to open the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Today, this victory could be compromised by an offshore tribunal answering to only the companies filing the suit.

In August, a firm whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Last week a tribunal in Washington DC was established to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The government enacts a policy, the national judiciary upholds it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK enacted against him after the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, demanding a colossal sum: half that nation's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with scepticism.

That threat has now materialised. This year, fossil fuel and extraction companies have initiated a record number of cases against nations rich and poor, opposing – like the example of the UK mine – official measures to prevent global warming. Companies have to date won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP