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What is your perceive our political system functions? It could be similar to this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Advent of Offshore Courts

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these bodies provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. The door is open only to corporations registered abroad.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but funds the arbitrators determine the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms learn from each other, and private equity bankroll lawsuits in return for a portion of the awards. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge found that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the consent the Tories had issued. Today, this success is under threat by an offshore tribunal accountable to only the corporations bringing the case.

During August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the United States was set up to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission 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? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a foreign company disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was convened, we learned from a ministerial statement 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 may employ the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, claiming $16bn: an amount representing half nation's yearly budget. Among the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that these events could not occur. In 2014, a government leader, championing the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and there has never been a issue in the past.” An expert on this topic accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have lodged a historic level of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP