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Can you perceive our system of government works? Maybe something like this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. The law is maintained by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Emergence of Offshore Courts

Today, international firms, and the oligarchs who own them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises operating from this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of vast sums, running into billions.

This compensation are based not on actual losses but compensation the panel members decide the company might otherwise have made. The administration could be forced to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Record numbers of cases are being brought, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the awards. The result? National sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions taken by legislatures is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of total confidentiality – into international trade agreements.

A Specific Case: The UK Coalmine

A year ago, a conservation group secured a significant win at the High Court. The justice found that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration later cancelled the consent the previous administration had approved. Currently, this success faces being overturned by an offshore tribunal answering to no one but the entities filing the suit.

Last August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “as corporations begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat has come to pass. Recently, oil and gas and mining firms have lodged a historic level of claims against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to prevent global warming. Corporations have thus far won $114bn through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP