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What is your reckon our political system works? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, foreign corporations, and the wealthy individuals who own them, have the power to sue nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open solely for entities based overseas.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These awards constitute not actual losses but funds the panel members decide the company would perhaps have made. The government could be forced to drop the legislation. It becomes deterred from enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions enacted by elected bodies is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer ruled that plans to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration later cancelled the permission the Tories had issued. Today, this victory could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The government enacts a policy, the high court supports it, then a foreign company disputes it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he’ll use the tribunal to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against a small nation for this reason, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Among the legal team on his side? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this matter labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “as corporations start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have to date won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP