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What is your perceive our political system functions? It could be along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Rise of Offshore Courts

In the modern era, overseas companies, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at private courts staffed by business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these bodies provide no right of appeal or legal review. The general public are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but money the tribunal officials conclude the company would perhaps have made. The government could be forced to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, worried about being sued.

A System Growing Exponentially

Historically high figures of legal actions are being brought, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the awards. The outcome? Sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions taken by legislatures is that this stipulation has been written – without democratic mandate, and often in an atmosphere of total confidentiality – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the High Court. The presiding officer found that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the consent the previous administration had approved. Now, this success is under threat by an foreign court accountable to only the entities filing the suit.

Last August, a firm whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. We have no clear indication how much this could amount to. What legal team is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The state passes a law, the high court upholds it, then a overseas corporation contests it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of nation's annual revenue. Included in the counsel on his side? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that such things could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “when companies grasp the authority they’ve been granted, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That prediction has now materialised. Recently, fossil fuel and extraction companies have lodged a historic level of suits against nations across the economic spectrum, opposing – similar to the UK mine – official measures to halt climate breakdown. Firms have to date won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP