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Can you understand our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Offshore Courts

In the modern era, overseas companies, along with the wealthy individuals who own them, can sue nation states for the regulations they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards represent not actual losses but compensation the arbitrators determine the company could potentially have made. The administration could be forced to rescind the measure. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being filed, as firms take cues from each other, and investment funds fund legal actions in return for a share of the awards. The result? Democratic sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings made by elected bodies is that this provision has been incorporated – absent public approval, and often in a climate of profound opacity – within international trade agreements.

A Real-World Case: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The new government later cancelled the licence the former government had granted. Now, this success could be compromised by an secret arbitration panel accountable to only the entities filing the suit.

In August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court validates it, then a international entity challenges it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK levied against him following the Russian aggression. He has previously filed a claim against another European state for this reason, demanding $16bn: half that government’s yearly budget. Part of the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that these events could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this topic described critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies grasp the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That warning has come to pass. This year, energy and mining firms have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to halt climate breakdown. Corporations have thus far won $114bn by using ISDS, of which energy giants have secured $84bn. That equates to the combined GDP