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How do you understand our political system works? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts composed of business advocates. The cases are conducted in secret. In contrast to domestic courts, these tribunals grant no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including companies operating from this country. They are open only to entities operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company could potentially have made. The government may have to rescind the measure. It becomes discouraged from enacting future policies in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as firms observe each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The result? Sovereignty and popular rule are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices taken by parliaments is that this clause has been inserted – without public consent, and often in an atmosphere of total confidentiality – within trade treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The justice determined that schemes to dig the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Currently, this success is under threat by an offshore tribunal answering to only the companies filing the suit.

Last August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. We have no clear indication how much this might be. Which individual is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: half that government’s annual revenue. Included in the counsel on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have lodged a record number of suits against nations both wealthy and developing, opposing – similar to the UK mine – official measures to prevent environmental catastrophe. Firms have to date won $114bn through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP