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What is your perceive our system of government functions? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. End of story. However, that’s how it used to work. No longer.

The Emergence of Offshore Courts

In the modern era, foreign corporations, along with the billionaires behind them, can sue elected administrations for the laws they pass, at private courts composed of corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including enterprises operating from this country. The door is open solely for businesses registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

These sums are based not on tangible damages but money the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It is deterred from introducing similar legislation along the same lines, for fear of facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being brought, as corporations take cues from each other, and investment funds fund legal actions in exchange for a cut of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions taken by legislatures is that this provision has been inserted – without democratic mandate, and typically amid conditions of profound opacity – within international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The Labour government then withdrew the licence the former government had granted. Today, this legal outcome is under threat by an secret arbitration panel accountable to only the companies petitioning it.

Last August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no idea how much this might be. Who is representing it against the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation for this reason, seeking a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with general mockery.

That prediction has now materialised. This year, fossil fuel and mining firms have initiated a historic level of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP