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Can you understand our political system operates? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it used to work. Not anymore.

The Rise of Offshore Courts

Today, foreign corporations, or the wealthy individuals who own them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or legal review. The general public cannot take a case to them, just as our government, or even companies operating from this country. They are open only to entities operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the panel members decide the company might otherwise have made. The administration might be compelled to drop the legislation. It is deterred from passing future laws in that area, for fear of being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices made by legislatures is that this stipulation has been inserted – without public consent, and frequently under a climate of profound opacity – inside trade treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the high court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The Labour government then withdrew the licence the former government had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to no one but the corporations bringing the case.

Last August, a company whose final controllers are located in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to commence operations. We have no idea how much this might be. Who is serving as its counsel against the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these events could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That warning has now materialised. In the current period, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, contesting – similar to the UK mine – official measures to halt climate breakdown. Firms have so far won $114bn through ISDS, of which oil majors have obtained the majority. That represents the combined GDP