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What is your perceive our political system operates? It could be similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Today, international firms, and the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. The cases take place away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including businesses based in this country. Access is granted solely for businesses based overseas.

When a secret court finds that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the panel members conclude the company could potentially have made. The government might be compelled to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, for fear of being sued.

A Process Running Rampant

Historically high figures of disputes are being filed, as corporations observe each other, and hedge funds fund legal actions in return for a cut of the takings. The outcome? National sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The new government later cancelled the consent the Tories had approved. Today, this success could be compromised by an offshore tribunal reporting to exclusively the corporations bringing the case.

In August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to consider the case.

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. What legal team is representing it in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a international entity disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the restrictions the UK levied against him following the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” An adviser on this issue described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and mining firms have initiated a record number of claims against nations rich and poor, challenging – similar to the UK mine – government attempts to prevent global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP