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How do you reckon our system of government works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it used to work. Not anymore.

The Advent of Offshore Courts

Today, foreign corporations, or the wealthy individuals behind them, can sue governments for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even companies based in this country. Access is granted exclusively to businesses registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but money the arbitrators conclude the company could potentially have made. The state could be forced to abandon its policy. It becomes discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and investment funds finance suits for a share of a share of the awards. The consequence? National sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on national carbon targets. The new government later cancelled the consent the former government had granted. Now, this success faces being overturned by an foreign court answering to no one but the companies bringing the case.

Last August, a firm whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has little idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case so far, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK levied against him after the Russian aggression. He has already started suing a small nation for this reason, seeking sixteen billion dollars: half that nation's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that these events could not occur. Previously, a former prime minister, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this matter described critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and mining firms have lodged a historic level of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP