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Can you reckon our political system works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Yet, that used to be how it used to work. No longer.

The Advent of Offshore Courts

Today, foreign corporations, and the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for entities based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These sums are based not on tangible damages but funds the arbitrators conclude the company might otherwise have made. The government may have to drop the legislation. It becomes hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as corporations take cues from each other, and private equity fund legal actions in exchange for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings enacted by parliaments is that this provision has been written – without public consent, and typically amid an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, a conservation group won a great victory at the High Court. The judge determined that schemes to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the permission the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel reporting to exclusively the entities petitioning it.

In August, a company whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it appears probable that he will utilise the tribunal to challenge the penalties the UK levied against him after the war in Ukraine. He has previously started suing another European state for this reason, demanding $16bn: an amount representing half nation's yearly income. Part of the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that these events were not possible. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this matter labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations grasp the power they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That threat has now materialised. This year, energy and resource corporations have filed a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP