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What is your understand our system of government operates? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. The law is maintained by the courts. End of story. However, that’s how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

Today, foreign corporations, or the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are held in secret. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These awards constitute not actual losses but funds the arbitrators decide the company might otherwise have made. The government may have to drop the legislation. It is deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as firms observe each other, and investment funds finance suits in exchange for a cut of the settlements. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions enacted by elected bodies is that this provision has been inserted – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Specific Case: The UK Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the corporations bringing the case.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit against the UK government. Recently a tribunal in the United States was set up to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. Which individual is representing it in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the high court upholds it, then a overseas corporation contests it through an secretive private court, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it appears probable that he may employ the tribunal to challenge the restrictions the UK imposed on him after the war in Ukraine. He has started suing another European state with similar intent, demanding sixteen billion dollars: half that government’s annual revenue. Included in the counsel on his side? a prominent lawyer, wife of the previous PM.

International law scholars argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with general mockery.

That prediction has come to pass. In the current period, oil and gas and resource corporations have filed a record number of suits against nations rich and poor, contesting – similar to the Whitehaven project – official measures to halt environmental catastrophe. Firms have so far won vast sums via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP