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What is your perceive our system of government functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. The law are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, and the wealthy individuals who own them, can sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for entities based overseas.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These sums are based not on real financial harm but funds the panel members conclude the company might otherwise have made. The state could be forced to rescind the measure. It will be hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being brought, as companies take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions taken by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer ruled that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The incoming administration later cancelled the permission the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies bringing the case.

During August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Who is representing it against the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him following the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking $16bn: equivalent to half of state's annual revenue. Among the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Costs

We were assured that such things were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled critics of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That prediction is now a reality. Recently, fossil fuel and extraction companies have filed a record number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP