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Can you understand our system of government works? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, overseas companies, along with the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but money the arbitrators determine the company could potentially have made. The government might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being brought, as companies observe each other, and investment funds fund legal actions in exchange for a cut of the awards. The consequence? National sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the rulings taken by legislatures is that this clause has been written – without democratic mandate, and often in conditions of profound opacity – into trade treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that plans to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the consent the former government had approved. Today, this success could be compromised by an offshore tribunal answering to only the entities filing the suit.

In August, a company whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. Last week a tribunal in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it is highly possible that he will utilise the tribunal to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against a small nation on these grounds, seeking $16bn: half that government’s yearly income. Part of the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Escalating Risks

We were assured that these scenarios could not occur. In 2014, a government leader, promoting the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms grasp the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That prediction has come to pass. In the current period, oil and gas and mining firms have filed a historic level of claims against nations rich and poor, opposing – like the example of the UK mine – official measures to prevent global warming. Corporations have so far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP