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What is your perceive our political system functions? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. However, that’s how it operated in the past. Those days are over.

The Rise of Offshore Courts

In the modern era, international firms, along with the oligarchs behind them, can sue nation states for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses based in this country. The door is open solely for businesses registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not real financial harm but funds the panel members determine the company might otherwise have made. The administration may have to abandon its policy. It becomes discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as companies observe each other, and hedge funds fund legal actions in exchange for a portion of the awards. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings made by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid conditions of profound opacity – inside trade treaties.

A Concrete Instance: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The new government subsequently revoked the licence the previous administration had granted. Today, this victory faces being overturned by an secret arbitration panel answering to only the entities bringing the case.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. The previous week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had received permission to commence operations. The public has little idea how much this sum represents. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case to date, but it appears probable that he’ll use the tribunal to contest the sanctions the UK imposed on him following the Russian aggression. He has started suing another European state for this reason, seeking sixteen billion dollars: equivalent to half of state's yearly budget. Among the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms grasp the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has come to pass. In the current period, oil and gas and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP