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What is your perceive our system of government works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Statutes are enforced by the courts. End of story. Well, that was how it used to work. No longer.

The Emergence of Offshore Courts

Nowadays, international firms, along with the billionaires who own them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. The door is open solely for entities based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but money the arbitrators conclude the company would perhaps have made. The state might be compelled to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being initiated, as companies observe each other, and private equity finance suits in return for a share of the settlements. The outcome? National sovereignty and democracy are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the rulings enacted by parliaments is that this clause has been written – without public consent, and often in an atmosphere of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists secured a significant win at the High Court. The justice ruled that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The new government later cancelled the licence the former government had approved. Now, this victory faces being overturned by an secret arbitration panel answering to only the entities bringing the case.

Last August, a company whose ultimate owners are based in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was convened to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. We have little idea how much this could amount to. Who is serving as its counsel against the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity challenges it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, seeking $16bn: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios wouldn’t happen. Years ago, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An expert on this topic accused activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by scepticism.

That warning has come to pass. Recently, fossil fuel and extraction companies have lodged a historic level of claims against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP