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How do you perceive our political system works? It could be similar to this. We elect MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

Today, overseas companies, along with the wealthy individuals who own them, can sue governments for the laws they pass, at private courts composed of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open exclusively to businesses operating from foreign soil.

When a secret court determines that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but compensation the tribunal officials determine the company might otherwise have made. The government may have to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Record numbers of disputes are being brought, as corporations take cues from each other, and private equity finance suits in return for a portion of the takings. The result? National sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the decisions taken by elected bodies is that this clause has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the former government had approved. Today, this victory could be compromised by an offshore tribunal reporting to exclusively the companies bringing the case.

During August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings versus the UK government. Recently a dispute settlement body in the United States was established to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this might be. What legal team is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it seems likely that he may employ the tribunal to contest the sanctions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, seeking $16bn: half that government’s annual revenue. Part of the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these scenarios could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies grasp the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. This year, oil and gas and extraction companies have filed a record number of cases against nations rich and poor, opposing – like the example of the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP