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What is your understand our political system operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. However, that was how it used to work. Not anymore.

The Rise of Offshore Courts

Nowadays, international firms, or the billionaires behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes take place in secret. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, including businesses based in this country. Access is granted only to corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company would perhaps have made. The state may have to rescind the measure. It is discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of cases are being initiated, as companies observe each other, and hedge funds finance suits for a share of a share of the awards. The result? National sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings made by legislatures is that this stipulation has been written – without public consent, and frequently under conditions of profound opacity – within international trade agreements.

A Real-World Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge determined that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had granted. Today, this success is under threat by an secret arbitration panel accountable to only the companies petitioning it.

In August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in Washington DC was established to consider the case.

The claimant is suing the UK for the money it might have made if the mine had received permission to proceed. We have no clear indication how much this could amount to. Who is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has already filed a claim against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of nation's yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms grasp the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have filed a record number of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to stop environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP