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How do you understand our system of government operates? It could be similar to this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. The law are enforced by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, or the billionaires that control them, can sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. Such disputes take place behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises based in this country. Access is granted exclusively to entities registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums represent not real financial harm but money the panel members determine the company could potentially have made. The government may have to abandon its policy. It will be hesitant to enacting future policies in that area, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being filed, as firms take cues from each other, and private equity fund legal actions for a share of a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions enacted by legislatures is that this provision has been written – without public consent, and frequently under an atmosphere of profound opacity – within trade treaties.

A Concrete Case: The UK Coalmine

Last year, environmental campaigners won a great victory at the High Court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the consent the Tories had granted. Today, this legal outcome faces being overturned by an foreign court accountable to only the entities bringing the case.

During August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state makes a decision, the national judiciary supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he will utilise the tribunal to contest the penalties the UK enacted against him after the war in Ukraine. He has already started suing another European state on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Among the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these events were not possible. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An adviser on this issue accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That warning is now a reality. Recently, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – official measures to prevent climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP