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Can you understand our system of government operates? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Advent of Offshore Courts

Today, foreign corporations, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open only to businesses operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These sums are based not on actual losses but funds the arbitrators conclude the company could potentially have made. The government could be forced to rescind the measure. It becomes hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a cut of the awards. The result? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the decisions made by elected bodies is that this stipulation has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have zero effect on climate commitments. The incoming administration then withdrew the permission the previous administration had issued. Now, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations filing the suit.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The claimant is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. We have no idea how much this sum represents. Who is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has filed a claim against a small nation for this reason, seeking a colossal sum: an amount representing half nation's yearly income. Among the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Risks

Politicians promised that these events were not possible. Previously, a government leader, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat has now materialised. In the current period, energy and mining firms have initiated a historic level of cases against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP