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What is your reckon our system of government operates? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that was how it used to work. Those days are over.

The Rise of Offshore Tribunals

Today, foreign corporations, or the billionaires that control them, can sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. They are open exclusively to entities based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but funds the arbitrators decide the company might otherwise have made. The state could be forced to abandon its policy. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being initiated, as companies learn from each other, and investment funds finance suits in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices enacted by parliaments is that this provision has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice determined that proposals to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The new government subsequently revoked the permission the previous administration had issued. Today, this success faces being overturned by an offshore tribunal accountable to only the corporations bringing the case.

During August, a company whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. Which individual is representing it challenging the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he will utilise the arbitration process to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has filed a claim against another European state for this reason, demanding $16bn: equivalent to half of nation's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That threat is now a reality. This year, fossil fuel and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to halt global warming. Corporations have to date won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP