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What is your reckon our political system operates? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Nowadays, overseas companies, or the oligarchs behind them, have the power to sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. They are open exclusively to corporations based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These sums are based not on real financial harm but money the tribunal officials decide the company might otherwise have made. The administration could be forced to drop the legislation. It will be discouraged from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as firms observe each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices enacted by elected bodies is that this stipulation has been written – without democratic mandate, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The justice determined that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The Labour government then withdrew the permission the previous administration had granted. Currently, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was established to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is representing it challenging the British government? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court validates it, then a foreign company disputes it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him following the invasion of Ukraine. He has already filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this issue described campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “when companies start to realise the power they now possess, they will shift their focus from the poorer states to the strong ones” were met with general mockery.

That warning has come to pass. Recently, energy and resource corporations have filed a historic level of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP