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Can you understand our system of government works? Perhaps something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Advent of Offshore Courts

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open only to corporations based overseas.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These sums represent not tangible damages but compensation the panel members conclude the company might otherwise have made. The government may have to abandon its policy. It becomes deterred from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The outcome? National sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions made by elected bodies is that this provision has been incorporated – without public consent, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, a conservation group won a great victory at the High Court. The justice found that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government then withdrew the licence the Tories had granted. Today, this success is under threat by an offshore tribunal accountable to exclusively the companies bringing the case.

In August, a company whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was set up to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is representing it challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The administration makes a decision, the high court validates it, then a international entity contests it through an unaccountable private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: half that government’s yearly budget. Included in the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

We were assured that these events wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” A consultant on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That threat is now a reality. In the current period, energy and extraction companies have filed a historic level of suits against nations rich and poor, challenging – similar to the UK mine – official measures to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP