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How do you perceive our political system operates? It could be similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Rise of Offshore Courts

Today, overseas companies, and the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. You or I cannot take a case to them, just as our government, including enterprises headquartered in this country. The door is open only to corporations registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the tribunal officials determine the company would perhaps have made. The state might be compelled to abandon its policy. It is deterred from passing future laws in that area, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as corporations observe each other, and investment funds bankroll lawsuits in return for a share of the awards. The outcome? Democratic sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the decisions made by legislatures is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The new government later cancelled the licence the former government had approved. Currently, this victory faces being overturned by an secret arbitration panel reporting to no one but the corporations filing the suit.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. What legal team is acting on its behalf challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the domestic court supports it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, seeking $16bn: equivalent to half of government’s yearly income. Included in the counsel representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An expert on this issue accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations begin to understand the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction is now a reality. This year, oil and gas and mining firms have lodged a record number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt climate breakdown. Companies have to date won $114bn through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP