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What is your understand our political system functions? It could be something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that’s how it once functioned. Not anymore.

The Advent of Offshore Tribunals

Today, overseas companies, along with the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open exclusively to entities registered abroad.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but compensation the tribunal officials determine the company might otherwise have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and private equity finance suits for a share of a portion of the awards. The consequence? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices taken by elected bodies is that this clause has been incorporated – without democratic mandate, and often in an atmosphere of extreme secrecy – inside trade treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the senior court. The justice determined that plans to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had approved. Now, this victory is under threat by an foreign court answering to only the entities petitioning it.

In August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was established to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no clear indication how much this might be. What legal team is representing it against the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The administration makes a decision, the high court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case so far, but it seems likely that he may employ the tribunal to challenge the restrictions the UK levied against him after the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that state's yearly income. Part of the legal team on his side? Cherie Blair, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from 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 funds Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that these events were not possible. Previously, a senior politician, promoting the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this topic labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That threat has come to pass. This year, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP