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Can you perceive our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Rise of Offshore Courts

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation represent not actual losses but funds the panel members decide the company might otherwise have made. The state may have to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The result? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the rulings made by parliaments is that this clause has been incorporated – without public consent, and often in a climate of extreme secrecy – into international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, activists won a great victory at the high court. The judge determined that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the licence the former government had granted. Currently, this success faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

During August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to go ahead. We have no idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it is highly possible that he may employ the tribunal to fight the sanctions the UK enacted against him following the war in Ukraine. He has already filed a claim against another European state with similar intent, demanding a colossal sum: an amount representing half state's annual revenue. Among the counsel on his side? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An adviser on this matter labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms 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 warning is now a reality. This year, energy and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to halt climate breakdown. Firms have so far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP