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How do you perceive our political system works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is maintained by the courts. End of story. Well, that was how it used to work. No longer.

The Emergence of Offshore Courts

In the modern era, foreign corporations, or the billionaires that control them, are able to litigate against nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. Access is granted exclusively to entities based overseas.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The government could be forced to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being brought, as corporations take cues from each other, and investment funds finance suits for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions enacted by legislatures is that this clause has been written – without public consent, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the licence the previous administration had approved. Currently, this victory could be compromised by an offshore tribunal reporting to exclusively the corporations petitioning it.

Last August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Who is serving as its counsel challenging the state? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case so far, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has already initiated proceedings against another European state for this reason, claiming sixteen billion dollars: half that state's yearly budget. Part of the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these events could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” An adviser on this topic labelled activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies begin to understand the authority bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat has come to pass. In the current period, fossil fuel and mining firms have lodged a record number of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP