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How do you reckon our political system operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, along with the billionaires who own them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including enterprises based in this country. They are open solely for businesses registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards are based not on actual losses but compensation the arbitrators decide the company could potentially have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being brought, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? National sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside trade treaties.

A Specific Example: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government then withdrew the consent the Tories had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies petitioning it.

During August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. We have little idea how much this could amount to. What legal team is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK imposed on him after the war in Ukraine. He has already started suing a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Threats

Politicians promised that such things wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this issue accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. This year, fossil fuel and mining firms have filed a unprecedented number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP