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How do you reckon our political system operates? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Emergence of Offshore Courts

Nowadays, foreign corporations, or the wealthy individuals behind them, can sue nation states for the regulations they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these panels allow no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies operating from this country. The door is open solely for corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

This compensation represent not real financial harm but money the panel members decide the company might otherwise have made. The government could be forced to rescind the measure. It is deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations take cues from each other, and hedge funds finance suits in return for a cut of the takings. The consequence? Sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the decisions taken by legislatures is that this provision has been written – absent public approval, and typically amid a climate of extreme secrecy – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge found that plans to open the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the consent the Tories had granted. Today, this victory is under threat by an offshore tribunal accountable to exclusively the entities petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. The public has little idea how much this might be. Who is representing it challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the panel on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has previously started suing another European state on these grounds, seeking $16bn: equivalent to half of state's yearly income. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” A consultant on this issue accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with scepticism.

That warning has now materialised. In the current period, oil and gas and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP