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How do you perceive our political system functions? It could be something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts made up of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies operating from this country. The door is open solely for entities registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These awards represent not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It is discouraged from introducing similar legislation in that area, worried about being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The outcome? Sovereignty and popular rule are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions taken by legislatures is that this clause has been inserted – without public consent, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists achieved a major legal triumph at the high court. The judge determined that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The new government then withdrew the permission the previous administration had issued. Now, this success faces being overturned by an offshore tribunal accountable to exclusively the companies bringing the case.

Last August, a company whose final controllers reside in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was established to hear it.

The claimant is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have little idea how much this sum represents. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company challenges it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it appears probable that he will utilise the arbitration process to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half nation's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has not been a issue in the past.” An expert on this topic accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations start to realise the influence they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That threat has come to pass. Recently, fossil fuel and mining firms have filed a record number of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP