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Can you reckon our political system functions? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, along with the billionaires who own them, are able to litigate against nation states for the regulations they pass, at private courts composed of commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, or even companies headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not actual losses but compensation the panel members conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes hesitant to passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being filed, as firms learn from each other, and private equity finance suits for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices taken by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – into international trade agreements.

A Specific Example: The UK Coalmine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer found that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal answering to exclusively the companies petitioning it.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration 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 acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it appears probable that he will utilise the tribunal to challenge the penalties the UK levied against him following the invasion of Ukraine. He has already filed a claim against another European state on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers representing him there? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Misleading Claims and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has come to pass. In the current period, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP