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Can you reckon our democratic process functions? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Yet, that was how it used to work. Those days are over.

The Advent of Offshore Tribunals

Today, overseas companies, or the oligarchs who own them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on real financial harm but funds the panel members determine the company could potentially have made. The government may have to rescind the measure. It will be discouraged from introducing similar legislation along the same lines, for fear of being sued.

A System Running Rampant

Historically high figures of cases are being filed, as corporations take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The result? National sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings enacted by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge found that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had granted. Today, this victory faces being overturned by an foreign court reporting to no one but the entities bringing the case.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. Recently a arbitration panel in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had received permission to commence operations. Citizens have no idea how much this might be. What legal team is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company disputes it through an secretive private court, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has already filed a claim against another European state on these grounds, claiming a colossal sum: half that nation's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Risks

We were assured that these events could not occur. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this issue labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms start to realise the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by general mockery.

That prediction has come to pass. This year, energy and resource corporations have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to prevent climate breakdown. Companies have so far won vast sums by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP