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How do you reckon our political system works? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. However, that’s how it used to work. Those days are over.

The Advent of Offshore Tribunals

Today, overseas companies, or the billionaires that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals made up of business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, including businesses based in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not real financial harm but funds the arbitrators determine the company would perhaps have made. The state could be forced to abandon its policy. It is hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being filed, as companies learn from each other, and hedge funds fund legal actions in return for a portion of the takings. The result? Democratic sovereignty and democracy are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the decisions enacted by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under conditions of profound opacity – into trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge determined that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the consent the former government had approved. Now, this success faces being overturned by an foreign court reporting to exclusively the corporations petitioning it.

During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has little idea how much this might be. Which individual is acting on its behalf against the British government? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a overseas corporation disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him following the war in Ukraine. He has previously filed a claim against another European state for this reason, demanding $16bn: an amount representing half nation's annual revenue. Among the lawyers on his side? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An expert on this topic accused campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That threat is now a reality. In the current period, oil and gas and mining firms have filed a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP