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Can you understand 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. The law are enforced by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Courts

Nowadays, international firms, along with the wealthy individuals behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. They are open exclusively to businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

This compensation are based not on actual losses but money the tribunal officials determine the company could potentially have made. The administration might be compelled to rescind the measure. It will be discouraged from passing future laws in that area, for fear of being sued.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as companies observe each other, and private equity bankroll lawsuits in exchange for a share of the awards. The outcome? National sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the High Court. The justice found that schemes to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the licence the former government had issued. Today, this victory is under threat by an secret arbitration panel accountable to only the companies petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Who is representing it challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court validates it, then a foreign company disputes it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has already filed a claim against a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Included in the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. Previously, a senior politician, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this matter accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations begin to understand the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with widespread derision.

That warning has now materialised. Recently, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP