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How do you perceive our system of government works? Maybe similar to this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it used to work. No longer.

The Emergence of Offshore Tribunals

In the modern era, foreign corporations, or the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. Such disputes take place behind closed doors. Unlike our courts, these panels provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. The door is open solely for entities registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it can award financial penalties of vast sums, running into billions.

These sums are based not on actual losses but funds the panel members determine the company could potentially have made. The government might be compelled to abandon its policy. It will be deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity finance suits in return for a cut of the settlements. The result? National sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings made by parliaments is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Concrete Case: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The incoming administration then withdrew the licence the previous administration had granted. Today, this success faces being overturned by an offshore tribunal answering to no one but the corporations petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. We have no idea how much this might be. Who is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Part of the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that these events could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An expert on this matter labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That prediction has now materialised. Recently, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to stop global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP