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What is your reckon our system of government functions? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Courts

Nowadays, international firms, and the billionaires behind them, have the power to sue nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, or even businesses operating from this country. The door is open only to corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it may order damages of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but compensation the arbitrators determine the company could potentially have made. The state could be forced to drop the legislation. It is hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being filed, as companies observe each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions made by elected bodies is that this clause has been written – absent public approval, and typically amid conditions of profound opacity – inside international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The judge determined that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the licence the Tories had approved. Today, this legal outcome could be compromised by an secret arbitration panel answering to no one but the companies filing the suit.

In August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to consider the case.

The company is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. What legal team is representing it challenging the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The state makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him after the war in Ukraine. He has already started suing Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as security for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that such things were not possible. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this topic described activists of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms grasp the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That warning has come to pass. This year, oil and gas and resource corporations have initiated a historic level of cases against nations rich and poor, challenging – similar to the UK mine – official measures to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP