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Can you reckon our political system operates? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. Simple as that. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, along with the oligarchs who own them, are able to litigate against nation states for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies headquartered in this country. Access is granted only to corporations operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but funds the panel members decide the company could potentially have made. The government could be forced to rescind the measure. It becomes hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms learn from each other, and private equity fund legal actions for a share of a share of the settlements. The result? Sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings enacted by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, activists secured a significant win at the high court. The judge found that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the licence the Tories had granted. Currently, this legal outcome is under threat by an offshore tribunal reporting to no one but the entities bringing the case.

During August, a firm whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. What legal team is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The state passes a law, the high court supports it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has started suing a small nation with similar intent, claiming $16bn: half that state's yearly budget. Part of the counsel representing him there? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries had to worry about these lawsuits. Predictions that “when companies begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That warning is now a reality. This year, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP