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What is your reckon our political system works? Maybe something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, or the oligarchs that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to 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. Access is granted only to businesses based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not actual losses but money the arbitrators decide the company might otherwise have made. The government could be forced to rescind the measure. It becomes discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being initiated, as companies take cues from each other, and private equity fund legal actions for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions made by elected bodies is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Example: The UK Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The judge found that proposals to open the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The new government later cancelled the consent the former government had granted. Today, this success faces being overturned by an foreign court accountable to no one but the entities petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the United States was set up to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: an amount representing half government’s yearly income. Part of the lawyers on his side? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter labelled campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations start to realise the power they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. This year, energy and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP