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How do you perceive our system of government works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Advent of Offshore Courts

Today, international firms, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to entities based overseas.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These awards represent not actual losses but funds the panel members decide the company could potentially have made. The administration might be compelled to rescind the measure. It is discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as companies observe each other, and investment funds finance suits in exchange for a share of the takings. The result? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions taken by parliaments is that this clause has been incorporated – without public consent, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the licence the previous administration had issued. Today, this success is under threat by an secret arbitration panel reporting to only the corporations filing the suit.

In August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

The claimant is suing 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. Who is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to challenge the sanctions the UK levied against him after the war in Ukraine. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that such things wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That threat is now a reality. In the current period, fossil fuel and mining firms have initiated a record number of claims against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to stop global warming. Firms have to date won $114bn by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP