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What is your perceive our political system functions? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue nation states for the policies they pass, at private courts composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for entities based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These awards constitute not actual losses but money the arbitrators decide the company would perhaps have made. The state might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Process Running Rampant

Historically high figures of legal actions are being brought, as companies take cues from each other, and private equity bankroll lawsuits for a share of a portion of the takings. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings enacted by parliaments is that this clause has been incorporated – absent public approval, and often in a climate of profound opacity – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, activists achieved a major legal triumph at the senior court. The justice determined that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had approved. Today, this success could be compromised by an secret arbitration panel answering to exclusively the entities bringing the case.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to proceed. Citizens have no idea how much this could amount to. Who is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot the MP. The administration makes a decision, the national judiciary supports it, then a foreign company challenges it through an secretive private court, and a elected official acts on its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it appears probable that he may employ the arbitration process to fight the penalties the UK enacted against him following the war in Ukraine. He has filed a claim against a small nation with similar intent, demanding $16bn: an amount representing half state's annual revenue. Included in the lawyers representing him there? a prominent lawyer, wife of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that such things could not occur. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Warnings that “once firms begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and resource corporations have lodged a record number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to stop climate breakdown. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP