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What is your reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these panels provide no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises based in this country. The door is open solely for entities based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

These sums represent not tangible damages but money the panel members determine the company might otherwise have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds finance suits in return for a cut of the awards. The result? National sovereignty and popular rule are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions enacted by legislatures is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – into trade treaties.

A Concrete Instance: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the licence the former government had granted. Currently, this success is under threat by an offshore tribunal accountable to exclusively the companies filing the suit.

Last August, a company whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case so far, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has already started suing Luxembourg with similar intent, demanding a colossal sum: half that state's yearly budget. Among the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that these scenarios could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – government attempts to halt climate breakdown. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP