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What is your reckon our system of government operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Emergence of Offshore Courts

Nowadays, international firms, and the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open only to corporations registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These sums are based not on real financial harm but money the panel members determine the company could potentially have made. The state could be forced to rescind the measure. It is discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being brought, as firms observe each other, and hedge funds fund legal actions for a share of a share of the settlements. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – inside trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the high court. The presiding officer found that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The new government subsequently revoked the permission the former government had granted. Now, this victory is under threat by an offshore tribunal accountable to no one but the companies bringing the case.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. Which individual is serving as its counsel in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a international entity contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking $16bn: an amount representing half government’s annual revenue. Included in the legal team on his side? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that these scenarios could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” A consultant on this issue labelled activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by general mockery.

That prediction has now materialised. This year, oil and gas and mining firms have lodged a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP