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What is your reckon our political system functions? It could be something like this. We elect MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Emergence of Offshore Courts

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against governments for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies based in this country. They are open only to businesses operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums are based not on actual losses but money the arbitrators determine the company would perhaps have made. The government might be compelled to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and often in a climate of profound opacity – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the High Court. The justice ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government then withdrew the consent the former government had granted. Today, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coalmine case was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing a small nation on these grounds, demanding $16bn: half that nation's annual revenue. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That warning has now materialised. In the current period, oil and gas and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to stop climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP