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What is your understand our system of government operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Advent of Offshore Courts

In the modern era, foreign corporations, and the wealthy individuals that control them, can sue nation states for the regulations they pass, at private courts made up of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises based in this country. They are open solely for corporations based overseas.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it may order compensation of vast sums, running into billions.

These awards represent not real financial harm but funds the tribunal officials determine the company could potentially have made. The government may have to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of disputes are being filed, as corporations learn from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The result? Democratic sovereignty and democracy are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings made by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The justice found that schemes to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no impact on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Now, this success is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

During August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have no idea how much this sum represents. Which individual is acting on its behalf against the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government passes a law, the high court supports it, then a foreign company contests it through an undemocratic private court, and a elected official works for its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK levied against him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, seeking a colossal sum: equivalent to half of state's yearly income. Among the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s delay in using frozen Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” An adviser on this issue accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That prediction is now a reality. This year, energy and extraction companies have filed a record number of claims against nations rich and poor, challenging – as in the case of the UK mine – official measures to halt global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured $84bn. That represents the combined GDP