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Can you understand our system of government works? It could be along the lines of this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that was how it used to work. Those days are over.

The Emergence of Offshore Courts

Today, international firms, and the wealthy individuals behind them, are able to litigate against nation states for the regulations they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even companies based in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

These awards represent not tangible damages but money the tribunal officials determine the company could potentially have made. The government may have to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as corporations observe each other, and investment funds finance suits for a share of a cut of the awards. The consequence? Sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the senior court. The justice determined that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government subsequently revoked the consent the Tories had approved. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to no one but the corporations filing the suit.

Last August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Last week a tribunal in the United States was convened to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the high court supports it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against another European state on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly income. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the funds Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this issue accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That threat is now a reality. Recently, oil and gas and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent global warming. Firms have thus far won vast sums by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP