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What is your reckon our system of government functions? Maybe something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that’s how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, foreign corporations, and the wealthy individuals who own them, are able to litigate against elected administrations for the policies they pass, at private courts made up of business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even companies based in this country. They are open only to entities registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation are based not on tangible damages but compensation the panel members conclude the company might otherwise have made. The state might be compelled to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies observe each other, and private equity bankroll lawsuits in return for a cut of the takings. The outcome? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings taken by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge found that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had granted. Now, this victory could be compromised by an foreign court answering to exclusively the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK imposed on him after the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that such things were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An adviser on this matter described activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has come to pass. Recently, oil and gas and extraction companies have initiated a record number of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – official measures to halt environmental catastrophe. Companies have to date won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP