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Can you understand our political system works? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses based in this country. Access is granted only to businesses based overseas.

When a secret court rules that a law or policy may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation represent not real financial harm but compensation the panel members decide the company would perhaps have made. The government could be forced to rescind the measure. It is discouraged from enacting future policies in that area, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions in exchange for a share of the awards. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the rulings made by elected bodies is that this provision has been inserted – absent public approval, and typically amid a climate of extreme secrecy – inside trade treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice determined that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The new government later cancelled the consent the former government had issued. Currently, this success faces being overturned by an offshore tribunal answering to no one but the corporations filing the suit.

Last August, a firm whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration passes a law, the high court validates it, then a foreign company contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he will utilise the tribunal to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has started suing another European state on these grounds, demanding $16bn: an amount representing half nation's annual revenue. Among the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that such things could not occur. Previously, a government leader, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That threat has now materialised. Recently, fossil fuel and extraction companies have filed a record number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP