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Can you understand our political system operates? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. The law is upheld by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Offshore Courts

Today, overseas companies, or the wealthy individuals behind them, can sue governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, just as our government, including enterprises operating from this country. They are open exclusively to corporations operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation represent not actual losses but compensation the tribunal officials conclude the company might otherwise have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions enacted by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of profound opacity – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that plans to open the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the consent the former government had granted. Now, this legal outcome faces being overturned by an offshore tribunal answering to exclusively the corporations bringing the case.

During August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this might be. Who is representing it challenging the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case at present, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him following the Russian aggression. He has already started suing another European state on these grounds, claiming a colossal sum: equivalent to half of nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this issue described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That threat has come to pass. Recently, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – similar to the UK mine – official measures to stop global warming. Companies have to date won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP