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How do you perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, and the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases take place behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including enterprises operating from this country. The door is open only to entities based overseas.

When a secret court rules that a government measure could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but funds the arbitrators decide the company could potentially have made. The government could be forced to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits in return for a share of the takings. The result? Democratic sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings taken by legislatures is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – within trade treaties.

A Concrete Case: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The Labour government then withdrew the permission the former government had approved. Today, this victory is under threat by an foreign court answering to no one but the companies petitioning it.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government passes a law, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the mining lawsuit was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case to date, but it appears probable that he may employ the tribunal to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has previously started suing another European state for this reason, seeking a colossal sum: an amount representing half government’s annual revenue. Part of the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that such things could not occur. Previously, a government leader, championing the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this topic described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by scepticism.

That prediction has now materialised. This year, fossil fuel and extraction companies have initiated a record number of claims against nations rich and poor, contesting – as in the case of the UK mine – state efforts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP