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Can you understand our political system works? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. Yet, that was how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals that control them, can sue governments for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies headquartered in this country. Access is granted solely for corporations registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These sums are based not on tangible damages but money the arbitrators decide the company could potentially have made. The government may have to rescind the measure. It will be deterred from enacting future policies in that area, worried about facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity finance suits for a share of a portion of the settlements. The consequence? Sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices made by legislatures is that this stipulation has been inserted – without democratic mandate, and often in a climate of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The judge found that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the former government had granted. Now, this success faces being overturned by an offshore tribunal accountable to only the entities filing the suit.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Among the legal team on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that such things were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That threat is now a reality. In the current period, oil and gas and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That equates to the combined GDP