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What is your reckon our system of government functions? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Rise of Offshore Courts

In the modern era, overseas companies, or the billionaires that control them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are held behind closed doors. Unlike our courts, these bodies allow no right of appeal or legal review. The general public cannot take a case to them, and neither can our government, including companies based in this country. The door is open only to corporations based overseas.

When a secret court rules that a government measure could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but money the panel members determine the company would perhaps have made. The administration may have to rescind the measure. It is deterred from passing future laws along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of cases are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions made by elected bodies is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the permission the Tories had approved. Now, this victory is under threat by an offshore tribunal accountable to only the entities filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The government passes a law, the high court supports it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case so far, but it appears probable that he may employ the arbitration process to fight the penalties the UK enacted against him following the war in Ukraine. He has started suing another European state with similar intent, demanding $16bn: an amount representing half government’s annual revenue. Included in the legal team 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 hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that such things could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An expert on this issue described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. This year, energy and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP