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What is your understand our political system operates? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Advent of Offshore Tribunals

Nowadays, international firms, and the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open only to entities registered abroad.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but funds the tribunal officials decide the company could potentially have made. The government may have to drop the legislation. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions in exchange for a share of the awards. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice found that schemes to dig the first major coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the licence the Tories had granted. Today, this victory could be compromised by an offshore tribunal reporting to exclusively the entities petitioning it.

During August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf against the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The administration enacts a policy, the national judiciary supports it, then a foreign company contests it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's yearly budget. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An expert on this topic labelled critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies grasp the power they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and extraction companies have filed a record number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to prevent global warming. Corporations have so far won vast sums by using ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP