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How do you perceive our political system works? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Courts

In the modern era, foreign corporations, along with the oligarchs behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals allow no right of appeal or judicial review. You or I cannot take a case to them, just as our government, including enterprises based in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it can award damages of vast sums, potentially billions.

This compensation represent not tangible damages but compensation the panel members conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies in that area, for fear of being sued.

A Process Running Rampant

Record numbers of cases are being brought, as corporations take cues from each other, and investment funds fund legal actions in return for a share of the awards. The result? National sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices made by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge found that schemes to dig the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The Labour government then withdrew the consent the Tories had issued. Today, this success is under threat by an foreign court reporting to exclusively the entities bringing the case.

In August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity contests it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, seeking sixteen billion dollars: half that government’s yearly budget. Included in the lawyers on his side? Cherie Blair, spouse of the ex-UK leader.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that such things could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this matter labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms grasp the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with widespread derision.

That threat has come to pass. Recently, energy and resource corporations have filed a record number of claims against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to halt climate breakdown. Firms have thus far won vast sums via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP