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How do you understand our system of government functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Advent of Offshore Courts

Today, international firms, along with the wealthy individuals that control them, can sue elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but compensation the arbitrators decide the company could potentially have made. The state could be forced to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as corporations observe each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The result? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings enacted by legislatures is that this clause has been inserted – absent public approval, and typically amid a climate of extreme secrecy – within international trade agreements.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice found that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the permission the former government had issued. Now, this legal outcome faces being overturned by an offshore tribunal answering to exclusively the entities petitioning it.

In August, a firm whose beneficial owners are located in the tax haven initiated proceedings against the UK government. Recently a tribunal in the United States was established to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. What legal team is representing it in opposition to the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The government makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the tribunal on the coalmine case was convened, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he may employ the tribunal to fight the penalties the UK enacted against him following the war in Ukraine. He has previously started suing a small nation for this reason, demanding $16bn: half that government’s annual revenue. Part of the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

The public was told that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this matter described activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms grasp the authority they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That prediction has now materialised. Recently, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – similar to the UK mine – official measures to halt climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP