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How do you reckon our political system operates? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Offshore Courts

Today, overseas companies, along with the oligarchs behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes are held in secret. Unlike our courts, these panels grant no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even businesses based in this country. Access is granted only to businesses registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but funds the panel members determine the company could potentially have made. The government may have to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being filed, as corporations observe each other, and hedge funds fund legal actions for a share of a share of the takings. The result? Sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – within trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The judge found that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the consent the former government had approved. Currently, this legal outcome faces being overturned by an offshore tribunal answering to no one but the entities filing the suit.

Last August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

This firm is suing the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Who is representing it challenging the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming a colossal sum: equivalent to half of government’s annual revenue. Part of the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as security for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these events wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all such treaties, declared: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this topic accused campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about such legal actions. Warnings that “as corporations start to realise the power they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. In the current period, oil and gas and resource corporations have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the Whitehaven project – official measures to prevent climate breakdown. Companies have so far won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP