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What is your reckon our political system works? Maybe similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. They are open exclusively to businesses registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These awards are based not on real financial harm but compensation the arbitrators decide the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions for a share of a share of the settlements. The outcome? Sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings made by parliaments is that this clause has been written – absent public approval, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration later cancelled the permission the previous administration had issued. Now, this legal outcome faces being overturned by an foreign court reporting to exclusively the entities bringing the case.

During August, a firm whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he’ll use the arbitration process to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, claiming $16bn: equivalent to half of nation's yearly budget. Part of the legal team representing him there? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that such things wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter accused campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “as corporations grasp the influence bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That prediction has come to pass. Recently, energy and resource corporations have filed a historic level of claims against nations both wealthy and developing, challenging – similar to the UK mine – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP