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What is your reckon our political system operates? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. However, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, along with the oligarchs behind them, can sue nation states for the policies they pass, at private courts composed of business advocates. The cases are conducted behind closed doors. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. You or I cannot take a case to them, just as our government, including businesses operating from this country. Access is granted solely for entities operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards represent not tangible damages but funds the tribunal officials decide the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes discouraged from enacting future policies in that area, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Concrete Example: The Cumbrian Coalmine

Last year, activists secured a significant win at the High Court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The new government then withdrew the licence the previous administration had issued. Now, this victory faces being overturned by an secret arbitration panel reporting to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

The company is suing the UK for the revenue it might have made if the mine had been allowed to proceed. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The government enacts a policy, the national judiciary supports it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK enacted against him after the Russian aggression. He has started suing Luxembourg on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly income. Part of the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized Russian assets as security for its financial support package arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that such things could not occur. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That threat is now a reality. Recently, energy and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won $114bn via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP