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How do you understand our political system functions? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Courts

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including companies based in this country. They are open solely for entities operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but money the arbitrators determine the company could potentially have made. The administration could be forced to abandon its policy. It will be hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The consequence? National sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the decisions taken by legislatures is that this clause has been written – absent public approval, and typically amid conditions of total confidentiality – into trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The judge ruled that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The Labour government later cancelled the consent the Tories had approved. Currently, this victory is under threat by an foreign court accountable to exclusively the corporations bringing the case.

Last August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim versus the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

This firm is suing the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this might be. What legal team is serving as its counsel against the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the high court validates it, then a international entity challenges it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. In 2014, a government leader, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this issue labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That threat has now materialised. Recently, energy and extraction companies have filed a historic level of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP