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How do you reckon our system of government functions? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Advent of Offshore Courts

Today, international firms, along with the billionaires who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of business advocates. These proceedings are held in secret. 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 companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it can award compensation of vast sums, running into billions.

These sums constitute not actual losses but money the arbitrators decide the company might otherwise have made. The administration may have to rescind the measure. It becomes discouraged from passing future laws in that area, worried about being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as firms learn from each other, and investment funds bankroll lawsuits in return for a share of the awards. The result? Democratic sovereignty and democratic governance are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the decisions taken by parliaments is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – into bilateral investment treaties.

A Specific Case: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The justice found that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had granted. Now, this victory is under threat by an secret arbitration panel reporting to no one but the corporations petitioning it.

During August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to proceed. We have little idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The state passes a law, the high court upholds it, then a foreign company challenges it through an secretive private court, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: equivalent to half of state's annual revenue. Among the legal team representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these events were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this issue described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That prediction has now materialised. In the current period, fossil fuel and mining firms have initiated a historic level of claims against nations rich and poor, challenging – like the example of the UK mine – government attempts to stop global warming. Firms have to date won $114bn via ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP