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How do you reckon our system of government works? Maybe something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Offshore Courts

In the modern era, foreign corporations, along with the billionaires that control them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to corporations registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These awards constitute not tangible damages but compensation the arbitrators conclude the company could potentially have made. The administration might be compelled to rescind the measure. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as companies observe each other, and hedge funds fund legal actions in exchange for a portion of the awards. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices taken by elected bodies is that this provision has been inserted – absent public approval, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government subsequently revoked the consent the former government had approved. Now, this success faces being overturned by an secret arbitration panel accountable to no one but the companies petitioning it.

In August, a firm whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was convened to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this might be. Who is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it is highly possible that he may employ the tribunal to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against another European state on these grounds, seeking $16bn: half that state's yearly income. Part of the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Mounting Costs

We were assured that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An expert on this matter described critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That threat is now a reality. This year, energy and extraction companies have lodged a historic level of suits against nations across the economic spectrum, challenging – similar to the UK mine – official measures to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP