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Can you reckon our system of government functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Rise of Offshore Courts

Today, foreign corporations, and the billionaires that control them, can sue elected administrations for the regulations they pass, at private courts made up of business advocates. Such disputes take place in secret. In contrast to domestic courts, these tribunals provide no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, running into billions.

These sums represent not real financial harm but money the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices taken by elected bodies is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The Whitehaven Coalmine

Last year, activists won a great victory at the senior court. The judge found that schemes to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the former government had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to exclusively the companies petitioning it.

During August, a company whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. We have little idea how much this might be. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a international entity contests it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it seems likely that he will utilise the tribunal to contest the restrictions the UK enacted against him following the war in Ukraine. He has started suing another European state with similar intent, claiming $16bn: equivalent to half of government’s annual revenue. Among the legal team on his side? a prominent lawyer, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this issue described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms grasp the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to prevent climate breakdown. Corporations have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP