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What is your reckon our political system operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Advent of Offshore Courts

Today, international firms, or the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies based in this country. They are open only to businesses based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, running into billions.

These sums represent not real financial harm but compensation the panel members determine the company would perhaps have made. The administration could be forced to drop the legislation. It will be discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and private equity bankroll lawsuits in exchange for a share of the takings. The result? National sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions taken by parliaments is that this provision has been written – absent public approval, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the former government had granted. Now, this success is under threat by an secret arbitration panel accountable to exclusively the companies petitioning it.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this might be. Who is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot the MP. The state passes a law, the domestic court supports it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK imposed on him following the Russian aggression. He has already started suing a small nation for this reason, claiming a colossal sum: equivalent to half of government’s annual revenue. Part of the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these events could not occur. Previously, a government leader, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this topic described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “when companies grasp the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning has now materialised. Recently, energy and mining firms have filed a historic level of suits against nations rich and poor, opposing – similar to the UK mine – government attempts to stop global warming. Firms have thus far won vast sums via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP