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Can you understand our system of government works? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, and the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at private courts composed of business advocates. These proceedings are conducted in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even companies based in this country. They are open only to businesses operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These sums are based not on real financial harm but funds the panel members determine the company could potentially have made. The state might be compelled to drop the legislation. It will be discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as firms take cues from each other, and investment funds finance suits in return for a cut of the settlements. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings taken by legislatures is that this provision has been written – absent public approval, and often in conditions of extreme secrecy – within international trade agreements.

A Concrete Case: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had approved. Now, this victory faces being overturned by an offshore tribunal accountable to only the corporations bringing the case.

During August, a company whose final controllers reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have no idea how much this could amount to. What legal team is representing it challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he may employ the tribunal to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has previously started suing another European state with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Part of the lawyers on his side? Cherie Blair, married to the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these scenarios could not occur. Years ago, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies grasp the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. This year, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the Whitehaven project – official measures to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP