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What is your reckon our political system functions? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Emergence of Offshore Courts

Nowadays, overseas companies, or the wealthy individuals behind them, can sue elected administrations for the policies they pass, at private courts composed of corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these tribunals provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. They are open only to entities operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but compensation the arbitrators conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is hesitant to enacting future policies in that area, due to the risk of facing litigation.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions made by elected bodies is that this clause has been inserted – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The justice found that proposals to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on national carbon targets. The Labour government then withdrew the licence the previous administration had issued. Today, this victory is under threat by an offshore tribunal answering to exclusively the companies petitioning it.

During August, a firm whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no idea how much this sum represents. Who is representing it against the British government? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him after the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: half that nation's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An expert on this issue accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That warning has come to pass. This year, oil and gas and mining firms have filed a record number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP