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How do you perceive our political system operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Rise of Offshore Courts

Nowadays, foreign corporations, and the wealthy individuals behind them, can sue governments for the regulations they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. Access is granted only to corporations operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions, running into billions.

These sums are based not on real financial harm but money the panel members determine the company would perhaps have made. The government might be compelled to rescind the measure. It becomes hesitant to enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as firms take cues from each other, and hedge funds finance suits in exchange for a share of the settlements. The result? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the High Court. The presiding officer ruled that schemes to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government then withdrew the consent the previous administration had approved. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the entities filing the suit.

During August, a corporate entity whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Who is representing it challenging the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has previously started suing Luxembourg with similar intent, seeking a colossal sum: half that state's annual revenue. Among the counsel on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that these events were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this issue labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Predictions that “when companies begin to understand the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have lodged a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP