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What is your reckon our system of government functions? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Rise of Offshore Courts

In the modern era, foreign corporations, or the oligarchs behind them, have the power to sue governments for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are held in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the tribunal officials conclude the company could potentially have made. The state might be compelled to abandon its policy. It will be hesitant to enacting future policies along the same lines, worried about facing litigation.

A System Growing Exponentially

Record numbers of disputes are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The result? Sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings enacted by parliaments is that this provision has been inserted – absent public approval, and typically amid conditions of total confidentiality – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the senior court. The judge determined that schemes to dig the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on our carbon budgets. The new government subsequently revoked the permission the former government had issued. Now, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the entities bringing the case.

In August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has filed a claim against another European state on these grounds, seeking a colossal sum: equivalent to half of government’s annual revenue. Included in the lawyers on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that such things wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” A consultant on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That warning is now a reality. In the current period, energy and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – like the example of the UK mine – government attempts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP