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Can you understand our political system works? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Courts

Today, overseas companies, along with the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or legal review. You or I cannot take a case to them, nor can our government, including businesses operating from this country. They are open solely for corporations based overseas.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

This compensation are based not on real financial harm but funds the panel members decide the company would perhaps have made. The administration may have to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Historically high figures of cases are being brought, as firms learn from each other, and hedge funds finance suits in return for a portion of the takings. The consequence? National sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by parliaments is that this clause has been incorporated – without democratic mandate, and often in conditions of profound opacity – inside international trade agreements.

A Specific Case: The UK Coalmine

A year ago, activists secured a significant win at the High Court. The judge ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Currently, this legal outcome faces being overturned by an foreign court answering to exclusively the corporations bringing the case.

In August, a firm whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the United States was set up to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the panel on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he may employ the arbitration process to contest the restrictions the UK levied against him after the invasion of Ukraine. He has started suing a small nation for this reason, demanding $16bn: an amount representing half government’s yearly income. Part of the counsel on his side? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Risks

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter accused critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have filed a record number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP