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Can you understand our democratic process works? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, international firms, along with the oligarchs that control them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. The door is open solely for corporations based overseas.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it can award damages of vast sums, even billions.

These awards represent not actual losses but funds the tribunal officials decide the company could potentially have made. The administration might be compelled to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as firms observe each other, and hedge funds bankroll lawsuits in return for a cut of the awards. The result? National sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices enacted by parliaments is that this stipulation has been written – without public consent, and often in a climate of profound opacity – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had granted. Now, this success faces being overturned by an offshore tribunal reporting to exclusively the corporations bringing the case.

Last August, a firm whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was established to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have little idea how much this might be. Who is representing it challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK levied against him following the invasion of Ukraine. He has already started suing another European state on these grounds, demanding $16bn: equivalent to half of state's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that these scenarios were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. Recently, energy and extraction companies have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the Whitehaven project – government attempts to halt environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP