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How do you perceive our political system works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open exclusively to businesses based overseas.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but money the panel members decide the company would perhaps have made. The government could be forced to drop the legislation. It is deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as firms observe each other, and hedge funds finance suits in return for a cut of the awards. The result? Sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions made by legislatures is that this clause has been incorporated – without public consent, and often in a climate of profound opacity – inside trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, activists won a great victory at the High Court. The presiding officer found that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on national carbon targets. The new government subsequently revoked the permission the Tories had approved. Today, this victory could be compromised by an foreign court answering to no one but the corporations filing the suit.

Last August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. Which individual is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration passes a law, the high court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK levied against him subsequent to the Russian aggression. He has previously started suing another European state for this reason, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this matter labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat is now a reality. In the current period, fossil fuel and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have to date won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP