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How do you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Emergence of Offshore Courts

In the modern era, overseas companies, and the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including enterprises operating from this country. They are open exclusively to businesses registered abroad.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

This compensation are based not on actual losses but funds the tribunal officials conclude the company could potentially have made. The state might be compelled to rescind the measure. It is discouraged from passing future laws along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as companies take cues from each other, and hedge funds finance suits for a share of a share of the takings. The result? Democratic sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings taken by elected bodies is that this provision has been inserted – without public consent, and often in conditions of extreme secrecy – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the senior court. The presiding officer determined that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel answering to only the entities bringing the case.

In August, a company whose final controllers are located in the tax haven lodged a claim against the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

The company is suing the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary validates it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, seeking a colossal sum: equivalent to half of state's annual revenue. Part of the legal team representing him there? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that these events were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this topic labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, energy and resource corporations have lodged a historic level of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – official measures to prevent global warming. Corporations have to date won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP