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Can you understand our system of government works? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Well, that’s how it once functioned. No longer.

The Advent of Offshore Courts

Nowadays, overseas companies, along with the billionaires who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. Access is granted only to businesses registered abroad.

When a secret court finds that a government measure might diminish the corporation’s projected profits, it may order compensation of vast sums, even billions.

This compensation are based not on tangible damages but funds the arbitrators decide the company could potentially have made. The state could be forced to abandon its policy. It will be deterred from passing future laws in that area, worried about being sued.

A Process Running Rampant

Record numbers of disputes are being brought, as firms observe each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? Democratic sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the rulings enacted by parliaments is that this provision has been written – without democratic mandate, and typically amid a climate of profound opacity – into trade treaties.

A Specific Case: The UK Coalmine

Last year, activists achieved a major legal triumph at the high court. The justice found that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on national carbon targets. The new government then withdrew the consent the former government had granted. Currently, this victory could be compromised by an secret arbitration panel accountable to no one but the entities petitioning it.

During August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the money it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this might be. What legal team is representing it challenging the state? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The government makes a decision, the high court upholds it, then a international entity contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has started suing another European state for this reason, demanding sixteen billion dollars: half that state's annual revenue. Among the lawyers on his side? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that such things wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this topic accused activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That prediction has now materialised. This year, oil and gas and resource corporations have lodged a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP