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Can you perceive our system of government operates? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Legislation are enforced by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Advent of Offshore Tribunals

In the modern era, international firms, along with the billionaires that control them, can sue governments for the regulations they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals grant no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies based in this country. The door is open solely for corporations registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It will be deterred from enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as firms observe each other, and hedge funds finance suits for a share of a cut of the takings. The consequence? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and often in a climate of profound opacity – into international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The justice ruled that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal answering to only the companies petitioning it.

In August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The state makes a decision, the domestic court validates it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding $16bn: equivalent to half of state's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that such things were not possible. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this matter described 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 these lawsuits. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. This year, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to halt climate breakdown. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP