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What is your perceive our system of government functions? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. However, that used to be how it used to work. Those days are over.

The Emergence of Offshore Courts

Nowadays, foreign corporations, and the oligarchs who own them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are conducted in secret. In contrast to domestic courts, these tribunals allow no opportunity to 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 only to businesses based overseas.

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

These sums constitute not tangible damages but funds the arbitrators conclude the company might otherwise have made. The administration could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being filed, as companies observe each other, and private equity fund legal actions in exchange for a portion of the awards. The outcome? National sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – into international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists won a great victory at the senior court. The judge determined that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The new government later cancelled the permission the previous administration had granted. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the companies filing the suit.

In August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. The public has no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government makes a decision, the domestic court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he may employ the arbitration process to fight the penalties the UK levied against him after the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, seeking $16bn: half that state's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Risks

The public was told that these scenarios could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about such legal actions. Warnings that “when companies begin to understand the influence they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That warning is now a reality. Recently, energy and resource corporations have initiated a historic level of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to prevent global warming. Firms have to date won vast sums by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP