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What is your reckon our democratic process functions? Perhaps along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Rise of Offshore Courts

Today, international firms, or the oligarchs who own them, can sue governments for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, including enterprises based in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but compensation the arbitrators determine the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from enacting future policies of a similar nature, due to the risk of being sued.

A System Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity finance suits in return for a share of the settlements. The outcome? National sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the choices made by elected bodies is that this stipulation has been written – without public consent, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

A year ago, activists won a great victory at the senior court. The justice ruled that proposals to open the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the licence the Tories had granted. Currently, this success could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a firm whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been allowed to go ahead. We have little idea how much this could amount to. What legal team is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The government enacts a policy, the high court supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him after the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly income. Included in the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in leveraging immobilised state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “once firms start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat has now materialised. This year, energy and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Corporations have to date won vast sums via ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP