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Can you perceive our political system functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, and the billionaires that control them, can sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for entities operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions, potentially billions.

These awards represent not tangible damages but money the panel members conclude the company might otherwise have made. The state could be forced to abandon its policy. It is discouraged from introducing similar legislation in that area, for fear of being sued.

A System Running Rampant

Unprecedented levels of cases are being brought, as firms learn from each other, and private equity fund legal actions in return for a share of the takings. The outcome? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings enacted by parliaments is that this provision has been inserted – absent public approval, and frequently under conditions of profound opacity – within bilateral investment treaties.

A Concrete Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the Tories had granted. Today, this victory faces being overturned by an secret arbitration panel reporting to exclusively the entities filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Who is serving as its counsel against the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK enacted against him following the war in Ukraine. He has started suing another European state on these grounds, demanding a colossal sum: half that nation's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these scenarios could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An adviser on this topic labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “as corporations start to realise the power bestowed upon them, they will shift their focus from the poorer states to the developed economies” were met with widespread derision.

That threat has come to pass. Recently, energy and extraction companies have filed a unprecedented number of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured $84bn. That represents the combined GDP