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What is your understand our political system functions? It could be similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Emergence of Offshore Courts

In the modern era, overseas companies, or the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, or even companies operating from this country. They are open solely for entities registered abroad.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but money the tribunal officials determine the company would perhaps have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Record numbers of disputes are being brought, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the rulings made by elected bodies is that this clause has been written – without public consent, and typically amid conditions of profound opacity – into trade treaties.

A Concrete Instance: The UK Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the consent the Tories had approved. Currently, this victory is under threat by an foreign court answering to only the companies filing the suit.

During August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was established to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no idea how much this might be. What legal team is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it seems likely that he will utilise the tribunal to challenge the penalties the UK imposed on him after the Russian aggression. He has previously started suing a small nation with similar intent, seeking a colossal sum: half that state's yearly budget. Among the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That prediction is now a reality. In the current period, energy and extraction companies have lodged a record number of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – government attempts to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP