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How do you perceive our system of government works? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that used to be how it used to work. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, and the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. The cases take place in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises based in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards are based not on actual losses but funds the tribunal officials decide the company might otherwise have made. The administration could be forced to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The result? Sovereignty and democracy are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices enacted by parliaments is that this stipulation has been written – without public consent, and often in a climate of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the licence the Tories had issued. Currently, this victory faces being overturned by an foreign court accountable to only the corporations filing the suit.

Last August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is representing it in opposition to the state? 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 national judiciary upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the tribunal to fight the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already started suing a small nation for this reason, demanding sixteen billion dollars: half that state's yearly budget. Among the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

Politicians promised that such things wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An adviser on this issue described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That threat has come to pass. In the current period, energy and extraction companies have filed a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP