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Can you understand our system of government works? Maybe similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the laws they pass, at private courts staffed by commercial attorneys. These proceedings take place away from public scrutiny. Unlike our courts, these panels grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to entities based overseas.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums represent not real financial harm but funds the arbitrators conclude the company might otherwise have made. The government might be compelled to rescind the measure. It will be deterred from introducing similar legislation in that area, worried about being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the rulings made by parliaments is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the permission the former government had granted. Currently, this victory could be compromised by an secret arbitration panel reporting to no one but the corporations filing the suit.

Last August, a corporate entity whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. We have no idea how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the sanctions the UK levied against him following the war in Ukraine. He has previously started suing another European state for this reason, claiming $16bn: an amount representing half state's annual revenue. Part of the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “when companies grasp the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That threat has come to pass. Recently, fossil fuel and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Corporations have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP