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Can you perceive our political system operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is upheld by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

Today, international firms, and the oligarchs that control them, can sue nation states for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including businesses based in this country. They are open exclusively to corporations registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

This compensation are based not on tangible damages but funds the tribunal officials conclude the company would perhaps have made. The government may have to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A System Running Rampant

Record numbers of disputes are being initiated, as firms take cues from each other, and private equity finance suits for a share of a portion of the takings. The consequence? National sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices made by elected bodies is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Example: The UK Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The judge found that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the permission the previous administration had issued. Currently, this victory faces being overturned by an offshore tribunal answering to no one but the corporations bringing the case.

Last August, a corporate entity whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to commence operations. We have little idea how much this might be. Who is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the arbitration process to challenge the sanctions the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against Luxembourg with similar intent, demanding $16bn: half that government’s yearly budget. Part of the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that these scenarios were not possible. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this issue labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies start to realise the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has come to pass. Recently, energy and mining firms have lodged a historic level of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP