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How do you perceive our system of government works? It could be something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Offshore Courts

Today, international firms, or the billionaires who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums represent not actual losses but compensation the arbitrators determine the company would perhaps have made. The administration may have to abandon its policy. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as companies learn from each other, and hedge funds fund legal actions for a share of a portion of the awards. The consequence? National sovereignty and popular rule are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices made by elected bodies is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The justice determined that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the permission the Tories had issued. Currently, this success is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

In August, a company whose final controllers are located in the offshore financial centre filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was established to hear it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the domestic court supports it, then a foreign company disputes it through an undemocratic private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it appears probable that he’ll use the tribunal to fight the sanctions the UK imposed on him following the Russian aggression. He has already initiated proceedings against another European state on these grounds, demanding $16bn: equivalent to half of nation's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter labelled activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms grasp the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That prediction is now a reality. Recently, energy and extraction companies have filed a historic level of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which oil majors have secured the majority. That represents the combined GDP