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How do you understand our political system operates? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. The law is upheld by the courts. End of story. However, that was how it used to work. Those days are over.

The Rise of Offshore Courts

In the modern era, foreign corporations, along with the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted only to corporations based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums represent not actual losses but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of cases are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the awards. The result? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by legislatures is that this provision has been inserted – without public consent, and often in an atmosphere of total confidentiality – inside trade treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer found that proposals to dig the first deep coalmine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the licence the Tories had issued. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was convened to hear it.

This firm is suing the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Which individual is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK levied against him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, seeking a colossal sum: an amount representing half state's yearly budget. Part of the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that such things were not possible. Years ago, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this matter described critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms start to realise the influence bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That prediction has come to pass. This year, oil and gas and extraction companies have lodged a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to prevent global warming. Companies have so far won $114bn by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP