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How do you understand our system of government functions? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Advent of Offshore Tribunals

Today, overseas companies, or the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel rules that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but money the arbitrators determine the company could potentially have made. The government might be compelled to abandon its policy. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and hedge funds fund legal actions in exchange for a portion of the takings. The result? Sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by legislatures is that this stipulation has been written – without democratic mandate, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the consent the Tories had approved. Now, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations bringing the case.

Last August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The claimant is suing the UK for the profits it might have made if the mine had been permitted to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK enacted against him following the war in Ukraine. He has already initiated proceedings against another European state for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Among the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” An expert on this matter labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning is now a reality. Recently, oil and gas and resource corporations have initiated a historic level of suits against nations rich and poor, opposing – similar to the UK mine – government attempts to halt global warming. Firms have thus far won $114bn by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP