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What is your understand our political system operates? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. However, that’s how it used to work. Not anymore.

The Rise of Offshore Tribunals

Nowadays, overseas companies, along with the billionaires that control them, are able to litigate against governments for the laws they pass, at private courts made up of commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses based in this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums constitute not actual losses but funds the tribunal officials conclude the company might otherwise have made. The government could be forced to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, worried about being sued.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies learn from each other, and hedge funds finance suits for a share of a cut of the takings. The result? Democratic sovereignty and democratic governance are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the rulings enacted by legislatures is that this provision has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The new government later cancelled the permission the previous administration had issued. Today, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the companies filing the suit.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration enacts a policy, the high court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: half that state's yearly income. Among the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as collateral for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has never been a problem in the past.” An expert on this matter labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning has come to pass. Recently, energy and mining firms have initiated a historic level of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Firms have to date won vast sums by using ISDS, of which energy giants have secured $84bn. That represents the combined GDP