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What is your understand our system of government works? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

Today, international firms, along with the oligarchs behind them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases take place in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including companies headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on real financial harm but funds the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It is discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as firms learn from each other, and investment funds fund legal actions in exchange for a share of the awards. The outcome? National sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices enacted by parliaments is that this clause has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Specific Example: The UK Coalmine

Last year, activists achieved a major legal triumph at the senior court. The justice found that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the consent the previous administration had approved. Currently, this success faces being overturned by an offshore tribunal answering to only the corporations petitioning it.

During August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK imposed on him after the invasion of Ukraine. He has already started suing Luxembourg on these grounds, claiming $16bn: half that state's annual revenue. Among the counsel on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these scenarios could not occur. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this issue labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That threat has come to pass. This year, energy and resource corporations have initiated a record number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP