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What is your reckon our political system operates? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Advent of Offshore Courts

In the modern era, overseas companies, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at private courts staffed by corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, including businesses headquartered in this country. The door is open exclusively to entities registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions, potentially billions.

These sums represent not actual losses but compensation the tribunal officials decide the company would perhaps have made. The administration could be forced to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and investment funds finance suits in exchange for a portion of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices made by elected bodies is that this provision has been written – without public consent, and often in a climate of profound opacity – within trade treaties.

A Specific Case: The UK Coal Mine

A year ago, activists secured a significant win at the high court. The judge determined that schemes to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no impact on climate commitments. The new government later cancelled the consent the Tories had issued. Today, this success faces being overturned by an foreign court reporting to exclusively the companies filing the suit.

Last August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to go ahead. The public has no idea how much this might be. Who is acting on its behalf against the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration makes a decision, the high court validates it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he’ll use the ISDS mechanism to contest the sanctions the UK imposed on him after the invasion of Ukraine. He has started suing another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this matter described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. In the current period, oil and gas and mining firms have filed a record number of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Firms have so far won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP