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How do you reckon our political system operates? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that was how it used to work. No longer.

The Emergence of Offshore Courts

Nowadays, international firms, and the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to corporations based overseas.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but funds the tribunal officials determine the company might otherwise have made. The administration could be forced to drop the legislation. It becomes deterred from passing future laws in that area, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being brought, as companies observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and democratic governance are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge ruled that plans to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The new government later cancelled the licence the previous administration had issued. Now, this victory faces being overturned by an foreign court accountable to exclusively the corporations petitioning it.

In August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in the US capital was convened to hear it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him following the Russian aggression. He has initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: half that government’s yearly income. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in using frozen state funds as collateral for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to stop global warming. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP