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What is your perceive our political system operates? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that used to be how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Today, foreign corporations, or the wealthy individuals that control them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. Access is granted only to businesses based overseas.

If a tribunal determines that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The state might be compelled to drop the legislation. It is deterred from passing future laws of a similar nature, for fear of being sued.

A System Growing Exponentially

Record numbers of disputes are being initiated, as firms learn from each other, and investment funds finance suits for a share of a share of the takings. The result? National sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the decisions enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The presiding officer determined that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Today, this success is under threat by an foreign court reporting to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration passes a law, the national judiciary validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK imposed on him following the invasion of Ukraine. He has started suing a small nation for this reason, claiming $16bn: an amount representing half government’s annual revenue. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these events could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter labelled campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and extraction companies have lodged a historic level of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to stop global warming. Companies have so far won $114bn via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP