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What is your understand our system of government operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

In the modern era, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but compensation the panel members conclude the company could potentially have made. The administration may have to rescind the measure. It becomes hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as firms take cues from each other, and private equity fund legal actions in exchange for a share of the takings. The outcome? Democratic sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions made by parliaments is that this stipulation has been inserted – absent public approval, and frequently under a climate of extreme secrecy – inside trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had granted. Currently, this success could be compromised by an offshore tribunal answering to only the entities filing the suit.

During August, a company whose beneficial owners reside in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. What legal team is representing it challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

Concurrently that the panel on the coal mine dispute was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, demanding a colossal sum: equivalent to half of state's annual revenue. Included in the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that these scenarios were not possible. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this matter labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with general mockery.

That warning has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to halt global warming. Companies have thus far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP