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What is your perceive our political system works? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies grant no avenue for appeal or judicial review. The general public cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted solely for entities registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but funds the panel members conclude the company might otherwise have made. The government may have to drop the legislation. It is discouraged from enacting future policies of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being filed, as firms take cues from each other, and private equity fund legal actions in return for a share of the takings. The result? Sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, activists won a great victory at the senior court. The judge determined that schemes to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The new government subsequently revoked the consent the former government had approved. Now, this success faces being overturned by an offshore tribunal accountable to exclusively the entities filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim against the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is representing it against the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him following the Russian aggression. He has already started suing Luxembourg on these grounds, seeking $16bn: equivalent to half of nation's yearly income. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a historic level of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP