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How do you understand our political system functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Emergence of Offshore Courts

Today, overseas companies, or the billionaires that control them, can sue nation states for the laws they pass, at private courts made up of business advocates. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted only to corporations operating from foreign soil.

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

These awards are based not on actual losses but funds the arbitrators decide the company could potentially have made. The state might be compelled to abandon its policy. It will be hesitant to introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as corporations learn from each other, and investment funds finance suits in return for a portion of the awards. The outcome? Democratic sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the choices enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The new government later cancelled the permission the Tories had granted. Today, this victory could be compromised by an offshore tribunal accountable to only the companies bringing the case.

In August, a company whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have no clear indication how much this might be. What legal team is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it is highly possible that he may employ the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously started suing another European state on these grounds, claiming $16bn: half that government’s annual revenue. Part of the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this matter labelled activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations start to realise the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat 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, challenging – like the example of the Whitehaven project – official measures to stop climate breakdown. Corporations have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP