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Can you understand our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Advent of Offshore Tribunals

Today, international firms, or the billionaires behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are held in secret. Unlike our courts, these panels grant no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These sums represent not real financial harm but funds the arbitrators determine the company would perhaps have made. The state could be forced to abandon its policy. It is deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies observe each other, and private equity fund legal actions in exchange for a share of the settlements. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the permission the former government had approved. Now, this victory could be compromised by an foreign court answering to exclusively the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to hear it.

This firm is suing the UK for the profits it might have made if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Who is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The administration makes a decision, the high court upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament represents its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK enacted against him following the war in Ukraine. He has initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Among the lawyers representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as security for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that such things wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An adviser on this topic labelled campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations grasp the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were greeted by general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to stop environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP