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What is your understand our political system operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Advent of Offshore Courts

Today, overseas companies, or the billionaires behind them, have the power to sue governments for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open solely for entities based overseas.

When a secret court finds that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums constitute not tangible damages but compensation the panel members conclude the company might otherwise have made. The state may have to abandon its policy. It will be deterred from enacting future policies along the same lines, due to the risk of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being filed, as firms observe each other, and investment funds fund legal actions for a share of a cut of the settlements. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions taken by elected bodies is that this stipulation has been written – without democratic mandate, and often in a climate of extreme secrecy – inside international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the Tories had approved. Currently, this success could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to proceed. We have no clear indication how much this might be. What legal team is representing it against the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The administration passes a law, the national judiciary supports it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half nation's yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these scenarios could not occur. Previously, a senior politician, championing the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations start to realise the power they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That threat has come to pass. In the current period, energy and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to halt environmental catastrophe. Firms have thus far won vast sums via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP