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Can you reckon our political system operates? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

Today, international firms, and the oligarchs behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. The cases take place away from public scrutiny. Unlike our courts, these panels allow no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. Access is granted only to corporations operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

These awards are based not on actual losses but funds the arbitrators decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be discouraged from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The result? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The incoming administration then withdrew the licence the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities bringing the case.

In August, a company whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in Washington DC was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. We have little idea how much this could amount to. What legal team is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK levied against him after the Russian aggression. He has filed a claim against Luxembourg on these grounds, claiming a colossal sum: an amount representing half nation's annual revenue. Among the counsel on his side? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that these events could not occur. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this issue labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “when companies begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has now materialised. This year, oil and gas and mining firms have initiated a record number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP