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What is your reckon our political system operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Advent of Offshore Courts

Today, overseas companies, or the oligarchs that control them, have the power to sue governments for the regulations they pass, at private courts made up of commercial attorneys. Such disputes take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it can award damages of vast sums, running into billions.

These awards constitute not tangible damages but compensation the arbitrators conclude the company could potentially have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations learn from each other, and investment funds finance suits for a share of a share of the awards. The result? Democratic sovereignty and democratic governance are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings enacted by elected bodies is that this stipulation has been incorporated – without public consent, and often in conditions of total confidentiality – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Last year, activists secured a significant win at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The new government then withdrew the permission the former government had approved. Today, this legal outcome faces being overturned by an foreign court answering to only the corporations bringing the case.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him after the war in Ukraine. He has started suing a small nation for this reason, demanding sixteen billion dollars: half that state's annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this topic described critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “once firms grasp the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That warning is now a reality. In the current period, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Firms have so far won vast sums via ISDS, of which oil majors have secured $84bn. That represents the combined GDP