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Can you perceive our political system operates? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, or the wealthy individuals who own them, can sue nation states for the policies they pass, at private courts staffed by corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but funds the tribunal officials decide the company might otherwise have made. The government could be forced to abandon its policy. It becomes discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and hedge funds fund legal actions in exchange for a share of the settlements. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings taken by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – within trade treaties.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had granted. Currently, this success could be compromised by an foreign court reporting to no one but the entities petitioning it.

Last August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this could amount to. Who is serving as its counsel challenging the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it is highly possible that he will utilise the arbitration process to fight the sanctions the UK levied against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, seeking a colossal sum: an amount representing half government’s yearly income. Included in the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these events could not occur. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An adviser on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. This year, energy and extraction companies have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP