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What is your reckon our system of government operates? Maybe similar to this. We elect MPs. They debate and pass bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Advent of Offshore Courts

In the modern era, overseas companies, along with the billionaires who own them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for businesses registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums are based not on tangible damages but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be deterred from passing future laws in that area, for fear of being sued.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies observe each other, and investment funds finance suits in return for a cut of the awards. The outcome? Sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices made by parliaments is that this stipulation has been incorporated – absent public approval, and often in a climate of total confidentiality – inside trade treaties.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the senior court. The justice ruled that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The new government then withdrew the licence the Tories had approved. Now, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

Last August, a firm whose final controllers are located in the tax haven lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to commence operations. The public has little idea how much this could amount to. What legal team is representing it in opposition to the state? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case so far, but it appears probable that he’ll use the arbitration process to challenge the penalties the UK levied against him after the war in Ukraine. He has already started suing a small nation on these grounds, claiming sixteen billion dollars: an amount representing half state's annual revenue. Part of the counsel representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that such things were not possible. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “when companies grasp the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That prediction has now materialised. This year, fossil fuel and mining firms have initiated a historic level of suits against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP