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How do you reckon our political system functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Courts

Today, overseas companies, or the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at private courts staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even businesses based in this country. Access is granted only to businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but funds the tribunal officials conclude the company would perhaps have made. The state may have to drop the legislation. It will be deterred from introducing similar legislation in that area, for fear of being sued.

A System Running Rampant

Record numbers of cases are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions enacted by legislatures is that this clause has been written – without democratic mandate, and typically amid conditions of extreme secrecy – within international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had granted. Now, this victory faces being overturned by an foreign court answering to only the entities petitioning it.

In August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Concurrently 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. The public knows little of the case to date, but it is highly possible that he may employ the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has previously started suing a small nation for this reason, demanding a colossal sum: an amount representing half nation's yearly budget. Part of the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that these events could not occur. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That warning has now materialised. This year, energy and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP