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What is your understand our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, international firms, or the oligarchs behind them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. They are open only to entities operating from foreign soil.

Should an arbitration panel determines that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but money the arbitrators conclude the company could potentially have made. The state may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Running Rampant

Historically high figures of cases are being brought, as companies take cues from each other, and investment funds fund legal actions in return for a share of the settlements. The outcome? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by legislatures is that this provision has been inserted – without public consent, and often in a climate of total confidentiality – within trade treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the high court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have no impact on national carbon targets. The incoming administration then withdrew the permission the previous administration had granted. Today, this victory faces being overturned by an offshore tribunal answering to no one but the entities bringing the case.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was established to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. What legal team is serving as its counsel against the state? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against another European state for this reason, seeking $16bn: an amount representing half nation's yearly budget. Included in the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this topic labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies begin to understand the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That warning is now a reality. In the current period, fossil fuel and resource corporations have lodged a unprecedented number of claims against nations rich and poor, challenging – similar to the UK mine – government attempts to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP