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How do you perceive our system of government works? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that used to be how it operated in the past. No longer.

The Rise of Offshore Courts

Today, foreign corporations, or the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including businesses operating from this country. The door is open only to entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These awards represent not actual losses but money the arbitrators determine the company could potentially have made. The state might be compelled to abandon its policy. It becomes discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as companies take cues from each other, and investment funds finance suits in exchange for a share of the takings. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the rulings taken by legislatures is that this provision has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had issued. Now, this success could be compromised by an foreign court accountable to only the entities bringing the case.

Last August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a dispute settlement body in the United States was set up to adjudicate on it.

This firm is suing the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Which individual is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the domestic court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the sanctions the UK levied against him subsequent to the war in Ukraine. He has filed a claim against another European state on these grounds, seeking a colossal sum: half that government’s yearly income. Included in the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that these events wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a case in the past.” An adviser on this matter accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms grasp the power they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. Recently, energy and resource corporations have filed a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP