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How do you reckon our political system operates? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Rise of Offshore Courts

Nowadays, foreign corporations, or the billionaires behind them, can sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

These awards represent not actual losses but funds the panel members decide the company would perhaps have made. The state might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as companies take cues from each other, and private equity fund legal actions for a share of a share of the settlements. The outcome? Democratic sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices made by parliaments is that this stipulation has been inserted – without public consent, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice found that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel reporting to only the companies bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

The company is suing the UK for the money it might have made if the mine had been permitted to go ahead. We have little idea how much this might be. Which individual is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against another European state on these grounds, seeking sixteen billion dollars: an amount representing half state's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, oil and gas and extraction companies have lodged a record number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to stop global warming. Companies have to date won $114bn by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP