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Can you perceive our political system functions? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. However, that was how it used to work. Those days are over.

The Advent of Offshore Tribunals

Today, foreign corporations, along with the billionaires behind them, can sue nation states for the regulations they pass, at private courts composed of commercial attorneys. These proceedings take place in secret. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to corporations based overseas.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but funds the arbitrators decide the company might otherwise have made. The state might be compelled to drop the legislation. It becomes hesitant to passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as companies take cues from each other, and private equity fund legal actions in return for a share of the takings. The result? National sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the decisions made by parliaments is that this provision has been incorporated – without public consent, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The new government later cancelled the consent the previous administration had issued. Today, this victory is under threat by an foreign court reporting to no one but the companies filing the suit.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the US capital was established to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been permitted to proceed. We have no idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK levied against him after the war in Ukraine. He has already filed a claim against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that such things could not occur. Years ago, a government leader, promoting the largest and riskiest of all such treaties, declared: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this issue labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has come to pass. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to stop global warming. 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 equates to the combined GDP