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How do you perceive our political system functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. However, that was how it once functioned. No longer.

The Rise of Offshore Courts

Today, overseas companies, and the wealthy individuals behind them, can sue nation states for the policies they pass, at private courts staffed by business advocates. The cases take place away from public scrutiny. Unlike our courts, these panels provide no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open exclusively to corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

This compensation represent not actual losses but money the panel members determine the company might otherwise have made. The state may have to drop the legislation. It is discouraged from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations take cues from each other, and investment funds fund legal actions in return for a cut of the settlements. The consequence? National sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions enacted by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of profound opacity – into international trade agreements.

A Specific Example: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the High Court. The judge found that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the consent the Tories had granted. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to no one but the companies bringing the case.

Last August, a firm whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been permitted to go ahead. We have little idea how much this sum represents. What legal team is representing it in opposition to the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming $16bn: equivalent to half of state's yearly budget. Included in the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this topic labelled activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That warning is now a reality. Recently, energy and mining firms have filed a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP