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What is your perceive our political system functions? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. However, that’s how it used to work. Those days are over.

The Emergence of Offshore Courts

In the modern era, international firms, along with the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open solely for businesses operating from foreign soil.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of vast sums, potentially billions.

These awards are based not on actual losses but funds the tribunal officials decide the company would perhaps have made. The government could be forced to abandon its policy. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as corporations observe each other, and investment funds fund legal actions for a share of a cut of the settlements. The result? Sovereignty and democracy are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices made by legislatures is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The justice ruled that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government then withdrew the licence the previous administration had granted. Now, this victory could be compromised by an offshore tribunal accountable to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Which individual is serving as its counsel against the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case so far, but it appears probable that he may employ the arbitration process to fight the sanctions the UK enacted against him following the war in Ukraine. He has filed a claim against a small nation with similar intent, demanding $16bn: an amount representing half government’s annual revenue. Among the counsel representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that these events wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An adviser on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning has come to pass. Recently, fossil fuel and extraction companies have lodged a historic level of cases against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to stop global warming. Corporations have so far won $114bn through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP