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Can you perceive our system of government functions? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that’s how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, international firms, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including enterprises headquartered in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it may order compensation of vast sums, potentially billions.

These awards represent not actual losses but compensation the tribunal officials conclude the company could potentially have made. The administration might be compelled to drop the legislation. It becomes hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions taken by elected bodies is that this clause has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The Whitehaven Coal Mine

A year ago, activists secured a significant win at the senior court. The justice determined that plans to open the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the Tories had granted. Currently, this legal outcome faces being overturned by an foreign court accountable to only the corporations bringing the case.

During August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this sum represents. Who is serving as its counsel against the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a overseas corporation disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him following the Russian aggression. He has already started suing a small nation on these grounds, demanding $16bn: an amount representing half government’s yearly budget. Among the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Costs

We were assured that these events were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this topic labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. Recently, energy and extraction companies have lodged a unprecedented number of suits against nations rich and poor, opposing – as in the case of the UK mine – government attempts to halt global warming. Companies have to date won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP