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What is your perceive our system of government works? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Yet, that was how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

Today, international firms, or the wealthy individuals behind them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted exclusively to entities registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation represent not actual losses but funds the panel members conclude the company would perhaps have made. The government could be forced to rescind the measure. It is deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of cases are being filed, as corporations learn from each other, and investment funds finance suits in exchange for a portion of the takings. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices enacted by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The judge ruled that plans to dig the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the licence the former government had issued. Currently, this success could be compromised by an foreign court answering to no one but the corporations filing the suit.

During August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a tribunal in the US capital was set up to consider the case.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Who is representing it in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK levied against him following the war in Ukraine. He has already started suing a small nation with similar intent, demanding sixteen billion dollars: half that state's yearly income. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An expert on this matter described critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That warning has now materialised. In the current period, energy and mining firms have initiated a unprecedented number of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP