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What is your perceive our political system works? It could be something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, along with the wealthy individuals that control them, are able to litigate against governments for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases are held behind closed doors. Differing from national judiciaries, these bodies allow no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but funds the arbitrators determine the company could potentially have made. The state may have to drop the legislation. It becomes hesitant to passing future laws in that area, due to the risk of being sued.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as firms take cues from each other, and investment funds fund legal actions for a share of a cut of the settlements. The result? National sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the choices enacted by legislatures is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer found that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had issued. Today, this success is under threat by an offshore tribunal accountable to only the corporations petitioning it.

In August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to proceed. We have no idea how much this sum represents. What legal team is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it seems likely that he may employ the arbitration process to challenge the penalties the UK enacted against him after the war in Ukraine. He has started suing another European state for this reason, demanding a colossal sum: an amount representing half government’s annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

We were assured that these events could not occur. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “once firms grasp the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have filed a record number of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Companies have thus far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP