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What is your reckon our political system works? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Arbitration Panels

Nowadays, overseas companies, or the oligarchs behind them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. The door is open exclusively to entities registered abroad.

If a tribunal finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, running into billions.

These awards are based not on real financial harm but compensation the tribunal officials decide the company could potentially have made. The state could be forced to rescind the measure. It becomes discouraged from passing future laws in that area, for fear of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and investment funds bankroll lawsuits in return for a share of the takings. The outcome? Democratic sovereignty and democratic governance are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – within bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration then withdrew the consent the Tories had approved. Today, this legal outcome could be compromised by an foreign court accountable to no one but the entities petitioning it.

Last August, a firm whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in Washington DC was established to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no idea how much this could amount to. Who is representing it against the British government? An elected representative, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a international entity challenges it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was convened, we learned from a government response that the UK is also being sued 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 ISDS mechanism to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: half that nation's yearly budget. Included in the legal team on his side? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Threats

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter labelled activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. In the current period, fossil fuel and extraction companies have initiated a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to halt climate breakdown. Firms have so far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP