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What is your reckon our political system operates? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, and the billionaires who own them, can sue governments for the regulations they pass, at private courts staffed by business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it can award compensation of hundreds of millions, potentially billions.

These awards constitute not real financial harm but money the panel members conclude the company would perhaps have made. The state might be compelled to abandon its policy. It is deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as companies learn from each other, and private equity fund legal actions for a share of a portion of the awards. The consequence? National sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the choices taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice ruled that proposals to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The new government then withdrew the licence the Tories had approved. Currently, this victory faces being overturned by an offshore tribunal reporting to only the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. Citizens have no idea how much this might be. What legal team is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against another European state for this reason, seeking a colossal sum: half that government’s yearly income. Included in the lawyers on his side? a prominent lawyer, wife of the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that such things were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this issue labelled campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That threat has now materialised. In the current period, fossil fuel and mining firms have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Companies have to date won vast sums via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP