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How do you reckon our system of government works? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it used to work. Those days are over.

The Rise of Offshore Courts

Today, overseas companies, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open exclusively to corporations registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but compensation the tribunal officials decide the company could potentially have made. The administration might be compelled to drop the legislation. It becomes discouraged from passing future laws along the same lines, for fear of being sued.

A Process Running Rampant

Unprecedented levels of disputes are being initiated, as companies take cues from each other, and investment funds finance suits in return for a portion of the settlements. The result? Democratic sovereignty and popular rule are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the rulings enacted by parliaments is that this provision has been written – without public consent, and typically amid a climate of extreme secrecy – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The justice found that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Today, this success is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

During August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has already started suing a small nation for this reason, claiming $16bn: an amount representing half state's annual revenue. Among the lawyers on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” An adviser on this topic labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. This year, oil and gas and resource corporations have initiated a unprecedented number of claims against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP