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How do you reckon our system of government works? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that’s how it used to work. No longer.

The Emergence of Offshore Courts

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases are conducted in secret. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses based in this country. The door is open solely for businesses based overseas.

If a tribunal determines that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These sums constitute not tangible damages but compensation the tribunal officials conclude the company could potentially have made. The administration may have to abandon its policy. It becomes hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of cases are being brought, as firms take cues from each other, and investment funds fund legal actions in return for a cut of the settlements. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings made by legislatures is that this provision has been written – absent public approval, and typically amid conditions of profound opacity – within bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The justice ruled that proposals to dig the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The new government later cancelled the permission the previous administration had granted. Currently, this victory could be compromised by an foreign court accountable to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners are based in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was established to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is acting on its behalf against the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him after the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: half that nation's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that these events wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “We’ve signed trade deal upon trade deal and there has not been a problem in the past.” A consultant on this matter described activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction has now materialised. In the current period, oil and gas and extraction companies have lodged a historic level of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to stop global warming. Corporations have so far won vast sums through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP