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How do you understand our political system functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, or the billionaires who own them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including companies based in this country. The door is open exclusively to corporations registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, even billions.

This compensation represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be hesitant to introducing similar legislation in that area, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being brought, as firms take cues from each other, and private equity fund legal actions in return for a share of the settlements. The result? National sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices made by elected bodies is that this clause has been written – absent public approval, and often in a climate of total confidentiality – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the permission the former government had granted. Today, this success is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has no clear indication how much this might be. Which individual is serving as its counsel challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case so far, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: half that nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, married to the previous PM.

Legal experts contend that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these events were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this matter described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That warning has now materialised. In the current period, oil and gas and resource corporations have lodged a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP