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How do you understand our system of government functions? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Courts

Nowadays, overseas companies, along with the wealthy individuals that control them, are able to litigate against elected administrations for the regulations they pass, at private courts composed of business advocates. Such disputes take place in secret. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, including businesses based in this country. The door is open solely for entities based overseas.

When a secret court rules that a government measure could harm the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

This compensation represent not actual losses but compensation the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as corporations take cues from each other, and private equity finance suits for a share of a portion of the takings. The result? National sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices taken by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within trade treaties.

A Real-World Case: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the high court. The presiding officer found that plans to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the licence the former government had granted. Today, this success faces being overturned by an foreign court reporting to exclusively the corporations filing the suit.

During August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the US capital was set up to hear it.

The company 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 clear indication how much this might be. Who is representing it challenging the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he’ll use the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming sixteen billion dollars: half that government’s annual revenue. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that such things could not occur. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has not been a case in the past.” An expert on this issue labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That threat is now a reality. Recently, energy and mining firms have initiated a record number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP